IMF dampens Ukraine GDP outlook for 2021

The IMF worsened Ukraine’s real GDP outlook for 2021 to
3.5% yoy growth from a previously forecasted 4.0% yoy growth,
as reported in the October World Economic Outlook by the Fund. At the same
time, the IMF improved the 2022 GDP forecast to 3.6% yoy growth from 3.4% yoy
growth expected six months ago. Both in 2021 and 2022, Ukraine’s economic
growth will lag behind the global economy, which is expected to increase 5.9%
yoy and 4.9% yoy, respectively. The euro area economy is also expected to grow
faster (5.0% yoy in 2021 and 4.3% yoy in 2022.

The IMF expects Ukraine’s nominal GDP will reach UAH
4,983 bln (USD 181 bln) in 2021, or 18.9% higher yoy.

It also worsened Ukraine’s CPI forecast to 9.5% YTD in
2021 from 7.2% YTD. According to the IMF, consumer inflation will fall to 7.2%
YTD in 2022, and will gradually slow down to around 5% by 2024. At the same
time, the IMF improved the 2021 forecast of Ukraine’s current account balance
to a deficit of USD 1.2 bln from USD 4.2 bln expected in April. The fund
expects Ukraine’s debt to GDP ratio will decrease to 54% in 2021 and 44% in
2026 (from 61% in 2020).

The IMF numbers imply the fund is expecting stability
for the Ukrainian hryvnia vs. the dollar, as the UAH/USD rate is expected to be
on average 27.5x in 2021 and between 27.4x and 27.8x in the next five years.

Evgeniya Akhtyrko: Apparently, the very slow revival of Ukraine’s manufacturing is the major reason for the IMF’s revision of
Ukraine’s GDP outlook for 2021. The revisions of consumer inflation and the
current account balance are in line with current developments. The expected
stability of the hryvnia’s exchange rate is a good sign, as this has been a
major concern of international investors for years.