Page 44 - UKRRptDec23

The IMF has improved its expectations for Ukrainian economic growth to 4.5%. In the IMF's notification regarding the arrangements for the second review of the program as part of the expanded financing of the EFF, it is noted that the Ukrainian economy continues to demonstrate extraordinary resilience and further signs of stabilization. Recent economic developments point to a stronger-than-expected economic recovery in 2023 and a significant decline in inflation amid solid reserves and a stable foreign exchange market. Therefore, the IMF improved its growth forecast for Ukraine's 2023 GDP to 4.5%. Just last month in the World Economic Outlook, the Fund projected this rate at 2%, while IMF management statements ranged from 1% to 3%. At the same time, growth is expected to decrease to 3-4% in 2024. It is also noted that in the event that the war continues, the risks of forecast deterioration remain extremely high. Note that the government expects 4.6% GDP growth in the 2024 budget.
The EC has significantly improved its forecast for Ukraine's 2023 GDP from 0.6% to 4.8%. At the same time, the forecast for 2024 was reduced from 4% to 3.7%; in 2025, GDP growth is expected to be 6.1%. "Despite serious problems caused by Russia's aggressive war, Ukraine's economy demonstrated remarkable resilience in 2023 due to exceptional harvests, government incentives backed by unwavering support from international partners, and the authorities' commitment to ensuring macro-financial stability," the report says. However, by the end of the projected horizon, real GDP will remain approximately 20% below the pre-war level. In addition, annual inflation is forecast to ease to 7.6% in 2025 after a sharp decline in 2023. The budget deficit will remain elevated in 2024 due to high defense spending. However, higher nominal GDP growth rates should increase revenues in 2025 and contribute to deficit reduction. Public debt will steadily increase throughout the forecast horizon. It is expected to increase to just below 100% of GDP by 2025.
4.0 Real Economy 4.1 Industrial production
The war has accelerated Ukraine's expansion of its processing industry."If we take OECD standards, in developed countries, the share of the processing industry in GDP is 20%. Therefore, we set ourselves the task of increasing the share of processing in Ukrainian GDP to such an indicator. Under favorable external circumstances and with a consistent policy of stimulation with the development of the processing industry, this can be achieved in 10 years," said Economy Minister Yuliya Svyridenko. The changes should take place in the export field. Currently, the share of the processing industry is about 35%, but Ukraine must strive for 70-80%. "The paradox of today's situation is that the war accelerates these changes. Blocking the export of agricultural raw materials caused the growth of agro-processing. In the nine months of 2023, flour exports increased by 267% and pasta products - by 22%. We see farmers' investments in new processing facilities, and even more are planning to build new plants soon," Svyridenko stressed.
44 UKRAINE Country Report December 2023 www.intellinews.com