Ukraine Cabinet upgrades 2020 GDP forecast to 3.7% yoy growth

Ukraine’s Cabinet of Ministers approved on Oct. 23 an
updated macroeconomic forecast with GDP growth of 3.7% in 2020, Prime Minister
Oleksiy Honcharuk told a press briefing following its weekly meeting.
Previously, the government expected GDP to increase 3.3% yoy in 2020. The
forecast of GDP growth for 2021 and 2022 remain unchanged at 3.8% yoy and 4.1%
yoy, respectively.

Honcharuk stressed the government defined these
forecasts as “conservative” and noted that its “optimistic” forecast sees GDP
growth at 4.8% yoy in 2020, 5.5% yoy in 2021 and 6.5% yoy in 2022. The
optimistic scenario is attainable in the case of “real corruption fighting”,
Honcharuk noted.

The government also improved its forecast of consumer
inflation, expecting 5.5% YTD in 2020 (vs. 6.0% YTD previously), 5.3% YTD in
2021 (vs. 5.7% YTD previously) and 5.1% YTD in 2022 (vs. 5.3% YTD previously).
The average exchange rate in 2020 is projected at UAH 27.00/USD under the
conservative scenario and UAH 24.80/USD under the optimistic one.

Evgeniya Akhtyrko: The presented
forecast is in absolute contradiction to the Cabinet’s declared five-year economic plan. In
particular, the stated goal of real GDP growth by 40% in five years looks
unattainable even in the case of this new optimistic scenario.

As we previously noted,
the government needed to come up with a realistic macroeconomic forecast for
drafting the 2020 state budget, as any unreasonable projections would be
questioned by the IMF during the talks with Ukraine for a new loan deal.

The need for this down-to-earth macroeconomic forecast
is evidence that the electoral strategy of Zelensky’s team was highly populist
and lacked understanding on the ways and means for achieving its astronomical
goals. Faced with reality, these ambitious plans are falling apart.