IMF upgrades 2019 Ukraine GDP forecast, worsens C/A outlook

The International Monetary Fund (IMF) upgraded its
2019 forecast for Ukraine’s real GDP growth to 3.0% yoy from 2.7% yoy, according
to its World Economic Outlook (WEO) published on Oct. 15. In 2020-2024,
Ukraine’s GDP growth will range from 3.0% to 3.3%, the IMF predicted.

The IMF kept unchanged its forecast of 2019 consumer
inflation of 7.0% YTD.  It expects consumer inflation to gradually slow
down to 5.0% YTD in 2022. At the same time, the IMF worsened Ukraine’s current
account (C/A) deficit estimate to USD 4.2 bln (from USD 3.3 bln) for 2019 and
USD 5.6 bln (from USD 3.5 bln) in 2020. The C/A deficit will not exceed 4% of
GDP during the forecast period of 2019-2024, according to the IMF.

The IMF’s outlook implies that the average hryvnia
exchange rate (derived by dividing GDP in UAH terms by GDP in USD terms) will
amount to UAH 26.75/USD in 2019. The annual hryvnia depreciation rate in
2020-2024 will amount to 3.0-3.5%.

Evgeniya Akhtyrko: With GDP advancement of 4.6% yoy in 2Q19,
the IMF’s forecast for Ukraine’s 2019 GDP growth of 3.0% yoy looks quite
realistic even amid continuing stagnation in industry.
At the same time, we are more optimistic regarding inflation, expecting 6.5%YTD
in 2019.

With its upgrade, the IMF returned to a more
conservative vision of the C/A deficit, which is now closer to our expectation
of USD 5.4 bln for 2019. The IMF’s forecast of annual hryvnia depreciation of
3.0-3.5% in 2020-2024 is in line with our vision.