15 September 2014
National Bank of Ukraine (NBU) Head Valeriia Gontareva told the Yalta European Strategy summit on Sept. 12 that she expects Ukraine’s 2014 GDP will decline between 9-10 percent. She said she also anticipates a 35% decline in exports to Russia in 2014 and a 40% decline in 2015. At the same time, hryvnia devaluation and the subsequent exports growth to the EU by 14% has caused the current account balance to improve through August, prior to the Russian occupation of the Donbas region. Ukraine’s trade balance has worsened this year, though the IMF stand-by program has helped to offset declines, she said. The IMF projects a 6.5% GDP decline in 2014.
Alexander Paraschiy: Gontareva’s projections are disturbing. A 9 percent decline implies more than a 15% GDP contraction in 2H14, which would require a slump of more than 20% in industrial output. Given the devastation in the east, we cannot rule out a 20% industrial output decline starting from August after a 12.1% yoy drop in July. We estimate a 7.1% yoy GDP decline in 2014 but leave some room for a revision if the warfare escalates.