Ukraine's economy ministry projects GDP growth at 4.1% in 2021, 3.7% in 2022

Ukraine's gross domestic product may grow by 4.1% in 2021 and only by 3.7% in 2022 over the slow recovery of European countries.

The figures have been released in the consensus forecast "COVID-19 impact on the country's economy and society: Results of 2020, challenges and threats of post-pandemic development," prepared by the Ministry for Development of Economy, Trade and Agriculture jointly with the UNICEF office in Ukraine.

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Experts improved their forecast for the expected growth of Ukraine's GDP in 2021 by 0.9 pp, to 4.1% (compared to the previous estimate of 3.2% released in July 2020), while the expected growth of the Ukrainian economy in 2022 was revised upward by 0.2 pp, to 3.7% from 3.5%.

"The budgetary incentives introduced to support households and businesses will maintain high positions and will be reflected in the size of the budget deficit, which, according to experts, will gradually decrease compared to 2020, but will be higher than preliminary estimates (the consensus estimate for 2021 is 'minus' 4.9% of GDP against 'minus' 3.4% of the preliminary consensus forecast, that for 2022 is 'minus' 4.3% vs 'minus' 2.8% in the previous forecast)," it said.

Amid following the growth trajectory, Ukraine will face a gradual increase in the need for workers while unemployment will be decreasing, but it will not reach the pre-pandemic level (the consensus estimate for 2021 remained at the level of the previous one, i.e. 9.2%, while the forecast for 2022 slightly increased to 8.7% vs the previous one, which was 8.5%).

The consensus estimate of inflation (calculated December vs December) for 2021 was 7.4% (the previous estimate of the consensus forecast was 6%), that for 2022 was 6.6% vs the previous one, which was 6.0%.

In 2023-2024, according to experts, Ukraine's economy will continue growing: at 3.5% in 2023 and 3.9% in 2024, and inflation will return to the National Bank's benchmark indicators, i.e. 5.7% in 2023 and 5.1% in 2024.

Background

• Ukraine's gross domestic product (GDP) in the third quarter of 2020 declined by 3.5% y-o-y, according to the State Statistics Service.
• Ukraine saw a slowdown in its industrial production to 0.3% in November 2020 y-o-y without calendar adjustment, after a 5% decrease in October 2020 y-o-y.
• Based on the results of 11 months of 2020, the Ministry for Development of Economic, Trade and Agriculture estimated the GDP decline at 4.7%, which was generally in line with the projected trend.
• On December 18, 2020, Prime Minister Denys Shmyhal said the domestic economy might decline by no more than 5% of GDP in 2020.
• On December 29, 2020, the ministry projected a 4.6% increase in the country's GDP in 2021.
• The decline in Ukraine's GDP in the 10 months of 2020 slowed to 5.2%, from 5.5% reported in January-September 2020.
• Industrial production in December 2020 grew by 4.8% against December 2019.
• On January 11, 2021, the Ministry for Development of Economy, Trade and Agriculture said Ukraine's growth domestic product might drop by 3% in the first quarter of 2021.
• The national budget for 2021 provides for the growth of Ukraine's GDP at 4.6%.
• The International Monetary Fund predicts that the Ukrainian economy will grow by 4% in 2021, and the World Bank expects a moderate recovery of the Ukrainian economy in 2021 with a 3.8% rise in GDP.