IMF upgrades 2020 Ukraine GDP forecast

The International Monetary Fund (IMF) upgraded its
2020 forecast for Ukraine’s real GDP to a 7.2% yoy decline from an 8.2% yoy
drop, according to its World Economic Outlook (WEO) published on Oct. 13. In
2021-2025, Ukraine’s GDP growth will range from 3.0% to 4.0%, the IMF
predicted.

The IMF updated its 2020 consumer inflation forecast
to 5.2% YTD, compared to 7.7% YTD in April’s forecast. It expects consumer inflation
to speed up to 5.8% YTD in 2021 and cool down to 5.0% YTD in 2023-2025.

The IMF expects Ukraine’s current account (C/A) to
reach a USD 6.2 bln surplus in 2020, but it will switch to a USD 4.5 bln
deficit in 2021. The C/A deficit will not exceed 4% of GDP during the forecast
period of 2021-2025, 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 27.20/USD in 2020. In 2021-2025, the hryvnia average exchange
rate will not exceed UAH 28.10/USD.

Evgeniya Akhtyrko: The IMF
forecast of Ukraine’s 2020 GDP largely overlooks the country’s economic
developments in recent months, which indicate the economic decline slowed quickly
after the lockdown in March-May. With the IMF overestimating the 2020 downfall,
the 2021 GDP outlook for 3.0% yoy growth might be irrelevant.

The IMF’s outlook for Ukraine’s C/A deficit in
2021-2025 is quite moderate. The flat forecast profile for the hryvnia exchange
rate in 2021-2025 implies that the IMF expects the C/A deficit will be
compensated by foreign currency inflow to the country’s financial account.