Expert forecasts moderate weakening of hryvnia against U.S. dollar by year-end

An expert of the ICU investment group predicts that the weakening of the hryvnia against the U.S. dollar, which may be sold for UAH 29-30 per U.S. dollar by the end of this year, will be moderate.

This was announced by Alexander Martynenko, head of ICU's Corporate Research, during an online conference.

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"In the fourth quarter of 2020, we expect the hryvnia to weaken moderately over to the deterioration of devaluation expectations and the deficit of the current account – the range will be between UAH 29-30 per U.S. dollar at the end of the year," he said.

"The moderate weakening of the hryvnia will continue in 2021 due to the recovery in demand for imported goods and the growth of world energy prices," he added.

Forex forecasts

The pressure caused by the expanding trade deficit will be eased due to the return of foreign capital inflows, he said. The ICU's forecast for the end of 2021 stands at UAH 29.5-30.5 per U.S. dollar.

Martynenko also projects that a current account surplus will narrow, but the forecast for 2020 is improving, as COVID-19 suppresses imports and travel above expectations, while the inflow of money transfers has been quite steady.

"The current account surplus estimated at US$6.2 billion (4.2% of GDP) in 2020 should turn into a deficit of US$3.7 billion (-2.4% of GDP) in 2021," the expert said.

Forecast of international reserves

According to the expert, the balance of payments benefits from external conditions in general: the country's international reserves will expand by US$3.3 billion in 2020 and further to US$31.9 billion in 2021, which is 110% of the IMF's reserve adequacy indicator.