The National Bank of Ukraine (NBU) kept its forecast for a fall in gross domestic product (GDP) for 2020 at 6% and improved expectations for the growth of the indicator in 2021 – from 4% (in the July forecast) to 4.2 %, the website of the National Bank reports on October 22. “The contraction of the economy at the end of the year is primarily a consequence of the difficult II quarter for business, in which strict quarantine restrictions were applied. At the same time, business activity has noticeably revived in the context of the gradual easing of restrictions, ”the message says.
The National Bank added that the recovery in consumer and investment demand in the second half of the year will compensate for the worse than last year, the agricultural sector harvest and a smaller fiscal impulse. “The main driver of GDP growth at the level of 4% in 2021-2022 will remain private consumption. Economic growth will be supported by fiscal stimuli, soft monetary policy and recovery of external demand, ”the NBU said.
The solver clarified that an important prerequisite for the implementation of such a scenario is the further absence of strict quarantine restrictions in Ukraine and in the world. The report notes that the main assumption, which takes into account the NBU, is the continuation of cooperation with the International Monetary Fund (IMF). Another point the National Bank called receiving financing related to the IMF program from international partners.
“Cooperation with the IMF will allow Ukraine to continue to fulfill its external obligations and increase its international reserves to $ 29-30 billion,” the NBU experts say. According to the regulator, international reserves as of October 1 were at $ 26.5 billion. The NBU considers the long term and deepening of the coronavirus pandemic and the strengthening of quarantine restrictions to be the key risk for macro-financial stability, as before.
Risks of the negative impact of court decisions on macro-financial stability, escalation of the military conflict in the east of the country or its borders, and an increase in the volatility of world food prices also remain relevant.