Photo from UNIAN, by Volodymyr Hontar

The National Bank of Ukraine (NBU) says the country's economy contracted much less than expected in 2020, and it will grow at the rate of around 4% in 2021 and the following years, after the coronavirus crisis.

"The NBU estimates real GDP to decline by 4.4% in 2020, which is less than expected in the previous forecast (6%)," the regulator's press service said on its website on January 21.

Read alsoNBU keeps key policy rate unchanged at historic low"The Ukrainian economy recovered rather quickly in [the second half of the year] H2. After the strict lockdown ended, the decline in GDP slowed to 3.5% [year-over-year] y-o-y in [the third quarter] Q3 and continued to decelerate in Q4. The tightening of quarantine restrictions in November had a minor impact on business activity," the report said.

The rapid economic recovery was mainly driven by growth in domestic consumption. Increased household incomes and budget spending are keeping consumption high. Retail trade continued to grow rapidly in Q4. GDP dynamics were also improved by higher current budget expenditures on infrastructure, especially on road repairs, and on healthcare. On the other hand, companies' investment activity remained sluggish.

In 2021, the economy will almost recover from the losses inflicted by the coronavirus crisis: Ukraine's GDP will rise by 4.2% and will continue to grow rapidly at around 4% in 2022–2023, according to the NBU.

"Strong domestic demand will remain the main economic growth driver, underpinned by further increases in real household income. Lower uncertainty about the course of the pandemic will favor a recovery in investment activity," the press service said.

"The surplus of Ukraine's current account is expected to hit one of its record-high levels, reaching 4.8% of GDP. In 2021–2023, however, the current account will return to deficit," it added.

Ukraine's GDP

  • Ukraine's gross domestic product in the third quarter of 2020 declined by 3.5% y-o-y, according to the State Statistics Service.
  • Based on the results of 11 months of 2020, the Ministry for Economic Development, Trade and Agriculture estimated the GDP decline at 4.7%, which was generally in line with the projected trend.
  • On December 29, 2020, the ministry projected a 4.6% increase in the country's GDP in 2021.
  • On December 18, 2020, Prime Minister Denys Shmyhal said the domestic economy might decline by no more than 5% of GDP in 2020.
  • The decline in Ukraine's GDP in 10 months of 2020 slowed to 5.2%, from 5.5% reported in January-September 2020.
  • On January 11, 2021, the Ministry for Economic Development, Trade and Agriculture said Ukraine's growth domestic product might drop by 3% in the first quarter of 2021.