REUTERS
The country's GDP is expected to grow by 3.8%.
The World Bank predicts Ukraine's economic recovery in 2021 will be mild with a 3.8% rise in the country's gross domestic product (GDP).
It said in its Spring 2021 Europe and Central Asia Economic Update.
"Ukraine's economic recovery in 2021 is expected to be mild given high uncertainty associated with the vaccine rollout and the direction of economic policies to address bottlenecks to investment and safeguard macroeconomic sustainability," the World Bank said.
"The GDP growth projection of 3.8% is underpinned by positive base effects in agriculture and processing industry and takes into account that further temporary lockdowns are possible in the first half of 2021 due to the delays in vaccinations."
The World Bank says that with an estimated contraction of 4.5%, the economic impact of COVID-19 has been smaller than in most other countries, nevertheless the pandemic has caused a heavy toll on households and weakened the commitment by the government to undertake critical reforms.
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According to the update, the 2021 budget targets a 5.4% deficit. Together with 10.5% of GDP debt amortization and 1.3% of GDP of arrears to private sector, this will increase total fiscal financing needs to 17.2% of GDP (vs 15% of GDP in 2020). The increase in minimum wages will push the public wage bill to over 11% of GDP and create additional pressures on current account imbalances and inflation. Prudent fiscal policy is needed to address inflationary pressures in the medium term.
The poverty rate based on the US$5.5 a day threshold is expected to decrease to 2.5% in 2021, similar to the level in 2019.
"Accelerating the reform momentum is key to achieve faster economic growth and poverty reduction in 2022 and 2023," the update said.