Ukraine MinFin lowers 2016 real GDP forecast to 1% growth

Ukraine’s Finance Ministry has reduced its forecast for real GDP growth in 2016 to 1%, compared to 2% estimated previously, stated Finance Minister Natalie Jaresko on March 10, according to the Ukrainian News agency. She attributed the revision to falling resource prices on the global markets.  “We need to revise the budget implementation results for the first two months. I think we need to talk about lower fiscal collections since commodity prices have changed,” she said.

Jaresko’s announcement follows the Economy Ministry’s March 4 announcement that it has reduced its 1H16 GDP growth forecast to 0% yoy from 1% yoy. Recall, the 2016 state budget was drafted based on a 2% real GDP growth assumption.

Alexander Paraschiy: State officials have become disillusioned about economic growth prospects. Indeed, the first figures of 2.1% GDP decline in January (according to Economy Ministry) set a tone of disappointment for the year. There is a chance for some investment inflow on the back of state privatization, which is planned for 2016. However, even if it’s successful, this investment inflow is unlikely to spur recovery this year. Against this backdrop, we still are keeping our real GDP growth forecast at 0.6% for 2016.