Page 32 - UKRRptNov23

Dragon Capital has revised its macroeconomic forecast for 2024 and now
expects Ukraine's GDP to grow by no more than 5% instead of 8%. The
reason for this reevaluation is the longer duration of the hot war with Russia
than previously expected, explained the founder and CEO of the company,
Tomas Fiala. Dragon Capital's previous forecast predicted that security risks
would decrease in the first half 2024. This does not mean that the war would
be entirely over, but with decreased hostilities the company expected 8% GDP
growth by the end of 2024. "Now we expect the war to last the whole of next
year," Fiala said. “So, according to the new forecast, the economy will grow by
about 2-3%. If this number exceeds our forecast, it will not exceed 5%.” In
addition to direct hostilities, a key role will be played by how effective Ukraine’s
Black Sea ports will prove to be for the export of goods. Dragon Capital
predicts a moderate hryvnia devaluation for 2024 - the exchange rate at the
end of 2024 will be ₴41 for $1, and inflation will be less than 10%.
The NBU will revise its 2023 forecasts for GDP and inflation toward improvement. As the Deputy Chairman of the NBU, Serhii Nikolaychuk, noted, the situation in the agricultural sector has contributed to the positive changes. "In recent months, inflation has been falling more rapidly than we predicted in our July macroeconomic forecast," he said. Regarding GDP, the situation is also better than the NBU expected in July. "The main factor for lower inflation is the larger-than-expected harvest, which significantly lowers food prices," Nikolaychuk said. The NBU will announce the exact figures after the board meeting on the discount rate on October 26. In July, the National Bank predicted that inflation at the end of the year would be 10.6%. But in August, annual inflation slowed to 8.6%. As for GDP, in July the regulator expected a final GDP growth of 2.9%. Also, against the background of the latest situational changes, the NBU predicts that the transition to managed exchange rate flexibility will temporarily deteriorate inflation expectations. After that, the situation will stabilize.
The IMF has returned Ukraine to its long-term economic forecast and improved expectations for GDP growth. After the beginning of the full-scale Russian invasion in February 2022, the IMF only gave a forecast for the current year in its World Economic Outlook. Now, estimates for Ukraine for 2024-2028 are included in the review. According to the updated macro forecast, the IMF expects Ukraine's GDP to grow by 2% in 2023 and accelerate to 3.2% in 2024. As for inflation, the IMF forecasts an average annual inflation of 17.7% this year and 13% in 2024. According to the forecast, the dollar GDP of Ukraine will exceed the pre-war level of $199.8B (for 2021) only in 2026, when it will amount to $206.6B. According to IMF calculations, the average annual exchange rate of the hryvnia to the dollar will be in 2023 - ₴37.5 for $1, in 2024 - ₴41.4, and in 2028 - ₴53.9. As for the world economy, according to analysts, growth will be 3% in 2023 and 2.9% in 2024.
Deputy head of the IMF mission in Ukraine, Natan Epshteinalso positively assessed the NBU’s decision to switch to managed flexibility of the exchange rate because it meets the program's requirements and is essential for economic stability.
The head of the IMF mission in Ukraine, Gavin Gray, said that the evaluation of the extended financing program will be based on key measures that authorities have already implemented.
The International Monetary Fund (IMF), which in June improved its
forecast for Ukraine’s GDP growth this year from the range of "-3% to
+1%” to “from +1% to +3%”, is currently assessing the dynamics of the
economy closer to the upper end of this new range, said Deputy Chief of the
IMF Mission for Ukraine Natan Epstein.
32 UKRAINE Country Report November 2023 www.intellinews.com