Macroeconomic Forecast Ukraine

Українська

No.1 (17), January 2009

Macroeconomic Forecast Ukraine

Downs-and-ups of Ukrainian economy

Forecast period: years 2009 and 2010

Date of forecast completion: January 23, 2009

Authors: Oleksandra Betliy, Alla Kobylyanskaya, Vitaliy Kravchuk, Dmytro Naumenko, Katernyna Pilkevitch, Roman Voznyak

Lector: Veronika Movchan

GDP: The real GDP is estimated to decline by 7.2% in 2009 with major sectors of economy reducing their production due to deteriorated domestic and external demand. At the same time, thanks to the global economy recovery the real GDP is forecasted to growth by 6.4% in 2010.

Fiscal indicators: The consolidated fiscal revenues are expected to decline to 27.9% of GDP in 2009. The Government will have to run consolidated fiscal deficit at 1.7% of GDP to finance high recurrent fiscal spending. The consolidated fiscal revenues are forecasted to decline further to 24.3% of GDO in 2010, while the deficit will increase to 2.4% of GDP.

Balance of payment: In 2009 Ukraine is expected to have both current account and financial account deficits (4.8% of GDP and 8.2% of GDP, respectively), which will be covered by the interventions of the NBU. In 2010 the current account balance as well as financial account balance is forecasted to turn positive.

Monetary survey and inflation: The money supply is expected to remain close to 2008 levels in 2009, while it will grow by 24.2% next year. The exchange rate will be on average at 8.8 UAH/USD in 2009 and 7.28 UAH/USD in 2010. The consumer price inflation is estimated to slow down to 17.5% on average in 2009 with further deceleration to 14.1% in 2010.

The Major risk of the forecast: If the global economy will not start its recovery in the fourth quarter of 2009, the forecast will be downgraded.

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Macroeconomic Forecast Ukraine - update
No.15
November, 2008

• The real GDP growth in 2008 is estimated to decelerate to 3.5% compared to mid-year growth rates due to decline in industry.

• In 2009 the real GDP will drop by 4.3% for the first time since 1999 due to the reduction in domestic demand.

• The consolidated fiscal expenditures will decline relative to GDP during the forecast period.

• The consolidated fiscal budget will be balanced in 2008 and 2009.

• The current account deficit is estimated at 6.1% of GDP in 2008, mostly covered by the financial account surplus.

• In 2009 the current account deficit at 3.1% of GDP will be financed by the NBU international reserves and the IMF loan.

• The money supply growth is estimated to decelerate to 28.9% in 2008 with further slowdown to 7.6% in 2009.

• The CPI growth will reach 25.4% as annual average in 2008 and will slow to 16.4% in 2009.

• In 2009 average exchange rate will be at 6.3 UAH/USD.

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Macroeconomic Forecast Ukraine
No.14
October, 2008

• GDP: The real GDP growth is estimated at 5.9% yoy in 2008 backed by still strong though decelerating real private final consumption expansion. For 2009 the real GDP growth is forecasted to slow down to 2.7% yoy of GDP.

• Fiscal Indicators: The consolidated fiscal revenues are estimated at 30.8% of GDP and 30.3% of GDP in 2008 and 2009, respectively. The Government will run zero deficit in both years due to the scarce financing.

• Balance of Payment: The current account deficit is expected to widen to 6.8% of GDP and 9.3% of GDP in 2008 and 2009, respectively. In 2008 it will be covered by the financial account surplus. In 2009 major part of current account deficit will be financed at the expense of the international reserves of the NBU and the IMF loan.

• Monetary Survey and Inflation: The money supply is estimated to slow down to 30.6% yoy in 2008 with further deceleration to 15.9% yoy in 2009. The consumer price inflation will reach 25.2% as annual average in 2008 and considerably decelerate to 11.4% in 2009.

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Macroeconomic Forecast Ukraine
No.13
July, 2008

• The real GDP growth is estimated at 6.9% yoy in 2008 backed by strong real private final consumption expanding. At the same time, capital accumulation is estimated to grow moderately during the entire 2008.

• High inflation is the major risk for economic development in 2008 and 2009 as it hurts purchasing power and endangers overall macroeconomic stability in the country. Another risk is related to the international financial market turmoil, which will result in deceleration of the net inflow of foreign capital into banking sector, adversely affecting the part of investments and consumption financed through bank credits. Moreover, political turbulence poses an additional burden on the economy, negatively affecting investment activity in the country.

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Macroeconomic Forecast Ukraine
No.12
December, 2007

• The real GDP growth is estimated to stay at 7.2% in 2007, but a deceleration of growth to 6.1% is forecast for 2008.

• The deceleration of real GDP growth is attributed primarily to slower development of households' consumption.

• Investment activity is expected to remain high both in 2007 and 2008, despite political turmoil and increased cost of borrowing.

• The trade deficit is expected to preserve in 2008 due to higher import prices, despite the slowdown of growth rates of real imports.

• Manufacturing growth is forecast to slowdown in 2008 due to higher input prices and lower domestic demand.

• Consumer inflation will accelerate in 2008 and reach 14.6% as annual average compared to 12.8% in 2007.

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Macroeconomic Forecast Ukraine
No.11
May, 2007

• The real GDP is expected to increase by 7.6% in 2007 backed by strong investments and recovery of exports.

• In 2008 the real GDP growth is forecasted at 6.9%.

• Private final demand is expected to remain the major source of GDP growth in 2007, while in 2008 investments will take a lead.

• The political turmoil is expected to have no significant impact on growth in investments in 2007 and 2008.

• Growth in real exports will resume after two years of decline, but real imports will continue surpassing exports in 2007 and 2008.

• Average consumer price inflation is forecasted at 10.2% in 2007 and 8.3% in 2008.

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Macroeconomic Forecast Ukraine
No.10
October, 2006

• The real GDP growth is estimated at 6.3% in 2006 backed by growth in private consumption and investments.

• In 2007 the real GDP is forecast to grow by 5.9%.

• Private consumption growth will reach 18.1% in 2006, but decelerate to 8.9% in 2007 due to slower growth of disposable income of households.

• Despite political uncertainty, investments revived and expected to increase by 10.2% in 2006.

• In 2007 the growth rate of real investments is forecast to exceed the growth of private consumption and reach 15.1%.

• Imports will continue growing faster than exports stimulated by strong domestic demand.

• Consumer price inflation is forecast to stay around 8% in 2006 and in 2007.

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Macroeconomic Forecast Ukraine
No.9
May, 2006

• Real GDP growth will decelerate to 2.2% in 2006 against the background of sharp rise of imported gas prices.

• In 2007 the real GDP growth is forecast to improve to 3.7%.

• Key driving force of GDP growth remain final households' consumption both in 2006 and 2007.

• Investment activity remains sluggish in the beginning of 2006, but intensify late in the year. In 2007 investments are expected to restore high growth pace.

• Growth rate of imports will continue to surpass exports growth.

• Consumer price inflation is forecast to stay at around 12% in next two years.

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Macroeconomic Forecast Ukraine
No. 8
September, 2005

• The real GDP is forecast to grow moderately by 3.5% and 4.4% in 2005 and 2006 respectively.

• Final consumption will remain the major contributor to real GDP growth both in 2005 and 2006.

• Investment activity is expected to stay depressed until the second half of 2006 due to a high level of uncertainty.

• Imports will grow faster than exports throughout 2005 and 2006.

• The consumer price inflation is expected to decelerate slightly in 2006.

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Macroeconomic Forecast Ukraine
No. 7
May, 2005

• Real GDP growth is forecast to decelerate in 2005 and 2006 compared to previous years.

• In 2005 the real GDP is expected to increase by 7.0%, while in 2006 its growth is forecast to slow down to 6.4%.

• In the short run, final household consumption will remain the key contributor to real GDP growth on the demand side.

• The fiscal expansion is expected to stimulate final consumption by both households and government in 2005.

• Investment activities will remain at a very moderate pace in 2005 and the first half of 2006.

• The trade liberalisation and the revaluation of hryvnia are expected to foster imports in 2005.

• Ukraine's accession to the WTO is forecast to stimulate both exports and imports in 2006.

• Consumer prices are expected to increase by about 14% in 2005, however their growth will slow in 2006.

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Macroeconomic Forecast Ukraine
No. 6
November, 2004

• Real GDP growth is forecast to reach 12,8% in 2004, but is expected to decelerate to 8.1% in 2005.

• Private consumption is expected to be a key contributor to economic growth in both 2004 and 2005.

• Real state consumption will not increase in 2004 and 2005.

• Investment growth is forecast to shrink to 10.2% in 2004, but accelerate to 14.5% in 2005.

• While export growth remains one of the key factors of economic growth in 2004, import growth is expected to surpass it in 2005, contributing to lower GDP growth.

• Consumer price inflation is expected to reach 12.2% by the end of 2004, and decelerate to 9.1% by the end of 2005.

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Macroeconomic Forecast Ukraine
No. 5
April, 2004

• The real GDP is forecast to grow by 8.9% in 2004, and 7.5% in 2005.

• The major driving force for economic growth is expected to be private consumption, stimulated by tax reform.

• State consumption is expected to remain unchanged in real terms.

• Investments are forecast to slightly decelerate in 2004, but recover next year.

• Economic growth is expected to stimulate import demand, while a favourable world economic situation and economic growth in trade partners' countries are expected to fuel exports.

• The growth of value added in agriculture in 2004 is forecast at 8.0%, a welcome change from last-year's reduction.

• The continued growth of construction and machine building is forecast to satisfy a high investment demand both in 2004 and 2005.

• Inflation will reach 6.6% in 2004, but is expected to accelerate in 2005.

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Macroeconomic Forecast Ukraine
No. 4
December, 2003

• The real GDP is forecast to grow by 7.9% in 2003, and by 6.2% in 2004.

• While the year 2003 is marked by high investment and state consumption, the year 2004 is expected to be a year of private consumption.

• Implementation of tax reform is expected to stimulate private consumption, while hurting state consumption due to lower real fiscal revenues in 2004.

• Although imports grow faster than exports, the forecast balance of goods and services remains positive.

• The value added in agriculture reduced in 2003 due to a poor grain harvest, but is expected to pick up in 2004.

• A high growth rate was observed in construction in 2003, but is expected to slow next year.

• Inflation will reach 8% in 2003, and will not significantly decelerate in 2004.

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Macroeconomic Forecast Ukraine
No. 3
September, 2003

• The real GDP is forecast to grow by 5.6% in 2003, and by 5.4% in 2004.

• While the year 2003 is marked by high investment, the year 2004 is expected to be a year of private consumption.

• Implementation of tax reform is expected to stimulate private consumption, while hurting state consumption due to lower fiscal revenues in 2004.

• Improvement in investment climate and financial sources encourage investments in 2003, while political uncertainty may hamper them in 2004.

• Although imports grow faster than exports, the forecast balance of goods and services remains positive.

• The poor grain harvest leads to negative growth in agriculture in 2003, significantly reducing the overall economic growth.

• High growth rates in construction reflect increases in investment demand in 2003.

• Inflation will reach 7% in 2003, but should decelerate in 2004.

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Macroeconomic Forecast Ukraine
No. 2
April, 2003

• The real GDP is forecast to grow by 5.4% in 2003 mainly due to increased investment, while real growth in 2004, forecast at 5.1%, will be driven by private consumption.

• If the proposed tax reform is implemented in 2004, it will further stimulate private consumption at the expense of the state.

• Increases in profits and financial market developments are expected to contribute to a rise in investment activity in 2003.

• The import growth rate is expected to outstrip export growth, reducing the trade surplus in the forecast period.

• Construction will reach high growth rates due to increase in investments in the year 2003.

• A poor grain harvest is expected to lead to a further deceleration of growth in agriculture in 2003.

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Macroeconomic Forecast Ukraine
No. 1
October, 2002

• According to the forecast, real GDP will grow by 4.3% in 2002 and by 4.6% in 2003 mainly due to a further increase in private consumption.

• In 2002 state consumption is expected to decrease due to revenue problems, while in 2003 no changes in state consumption is forecasted.

• Compared to 2002, next year investment is expected to increase.

• Faster growth rates of imports than exports will lead to reduction in positive trade balance.

• Value added will rise in all sectors of the economy.

• Inflation is expected to reach 1.4% yoy in 2002 and to increase to 7.6% yoy in 2003.

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