The NBU says private consumption will remain the main economic growth driver / Photo from UNIAN, by Volodymyr Hontar

The National Bank of Ukraine (NBU) says that its GDP forecast for 2020 has remained unchanged.

"The economy of Ukraine will contract by 6% in 2020 but will resume growth at the level of around 4% in subsequent years," the NBU said on its website on October 22.

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"The main reason behind the year-end economic contraction lies in difficulties faced by businesses in Q2, when the strictest quarantine restrictions were in place," it said. "At the same time, business activity picked up markedly as the restrictions were eased. A recovery in consumer and investment demand in H2 will offset the lower crop harvest and smaller fiscal impulse."

According to the NBU, private consumption will remain the main economic growth driver, boosting GDP growth to 4% in 2021–2022.

"Fiscal stimuli, the loose monetary policy, and a rebound in external demand will support economic growth. This scenario is possible if the quarantine restrictions are not tightened in Ukraine and across the globe," it said.

The NBU projects that after the economy returns to steady growth; it will need less fiscal stimuli from the state.

"This will help gradually reduce the state budget deficit to around 3% of GDP in 2022," NBU Governor Kyrylo Shevchenko said. "Going forward, the public and publicly guaranteed debt, which grew to 63% of GDP this year, will decline by 2-3 pp a year. The decline will be underpinned by economic growth, prudent fiscal policy, and moderate exchange rate volatility."

Previous developments

  • The fall in Ukraine's GDP in the eight months of 2020 slowed to 5.8% after a 6.2% decline in January-July.
  • The fall in Ukraine's GDP in the seven months of 2020 slowed to 6.2% from 6.5% in the first half of the year.
  • The International Monetary Fund revised its forecast for the fall of the Ukrainian economy in 2020 to 7.2%, from 8.2%, which it had projected in June 2020.
  • S&P Global Ratings predicts a fall in Ukraine's real GDP in 2020 by 6%, which is 0.5 percentage points higher than in the agency's May forecast.