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The pandemic will lead to a severe economic downturn in Ukraine.
The German Economic Team in Ukraine has estimated the economic impact of the COVID-19 pandemic on Ukraine.
"The COVID-19 pandemic will lead to a severe economic downturn in Ukraine, with a real GDP decline of 7.0% expected in 2020 under the baseline," the team said in a policy study for April 2020.
"Given that GDP forecasts before the crisis were at around +3%, this implies a massive shock, which is more severe than during the last crisis of 2014/2015," the experts said.
It is noted the total impact is a combination of domestic lockdown measures, which were absolutely necessary to avoid a public health crisis, amplified by external shocks resulting from sharp declines in exports, certain commodity prices and remittances.
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According to the experts, despite strong external shocks, the economic fall will still be less than during the financial crisis in 2009. This is due to the high-quality macroeconomic policies of previous years, which increased the stability of the economy and created space for the use of supporting measures of monetary and fiscal policy.
It is also noted the stability of government spending supports the economy, despite a decrease in tax revenues, while Ukraine will soon sign a new agreement with the International Monetary Fund. Additional support for the economy is provided by a reduction in the key rate by the National Bank of Ukraine and a flexible exchange rate.
In addition, a sharp decline in investment is expected in Ukraine, but government consumption will stabilize the economy.
As for the impact on economic sectors, the transport will suffer the most: due to the closure of domestic and international passenger traffic and a decrease in the volume of trade in goods, the transport sector is expected to reduce the volume of services by 14.3% against 2019.
Retail trade will also experience a strong negative impact of quarantine and falling demand, which will result in a decrease of its volume by 8%. It is also noted that despite a significant decrease in steel exports, the impact of the pandemic on Ukrainian industry will be relatively less: its decline will amount to only 5%.