IMF lowers Ukraine 2016 GDP forecast

The International Monetary Fund has lowered its 2016 real GDP forecast for Ukraine to 1.5% yoy growth in 2016 from 2.0% yoy estimated previously, according to its World Economic Outlook published on April 12. The IMF also upgraded its 2016 nominal GDP forecast by 0.8% from its previous estimate to UAH 2,280 bln, or 15.2% yoy growth. At the same time, it reduced its forecast of nominal GDP in USD terms by 10.9% to USD 83.6 bln, implying a 7.7% yoy decline. The numbers indicate that the IMF assumes a UAH 27.3/USD average exchange rate in 2016, while earlier it expected a UAH 24.1/USD rate.

The IMF expects inflation to slow down to 13.0% YTD (15.1% yoy) in 2016 compared to 43.3% YTD (48.7% yoy) in 2015. It projects Ukraine’s C/A deficit to widen to USD 2.2 bln, or 2.6% of GDP in 2016, from USD 0.2 bln, or 0.2% of GDP last year. 

Alexander Paraschiy: The revised IMF forecast is getting closer to what we estimated two months ago (refer to our macro update published on Feb. 1). In particular, we projected 2016 nominal GDP at USD 83.2 bln and a UAH 27.0/USD annual average exchange rate. At the same time, the IMF remains more optimistic about Ukraine’s C/A prospects than we are. In particular, we anticipate stronger C/A deficit expansion to USD 3.0 bln (3.6% of GDP) by the year end. We also remain more conservative about Ukraine’s real GDP growth, which we still see at just +0.6% yoy in 2016. In light of the recent cancelation of the planned April natural gas price hike, we lowered our CPI forecast to 7.5% YTD growth, or 13.2% yoy, while the IMF did not consider this change in its estimates.