Ukraine’s economy is set to shrink by nearly 32% in 2022, central bank says

Oct 27 (Reuters) – Ukraine’s economy will contract by nearly 32% this year and annual inflation will accelerate to 30%, largely due to damage from the Russian invasion, the bank said on Thursday central ukrainian.

Assuming security risks decline and demand increases, gross domestic product will grow by around 4-5% a year in 2023 and 2024, the bank said in a quarterly inflation report.

“This year’s economic slowdown has been driven by weaker domestic demand, disrupted logistics and major losses of labor and production potential caused by the war,” he said, predicting that the unemployment rate would reach 30% this year.

“Fiscal policy is unprecedentedly accommodative and will remain so until the end of 2024. This will support the economy during the war and, coupled with the mitigation of security risks, contribute to economic recovery.”

Inflation – currently at nearly 25% – is expected to drop to 21% next year and fall below 10% in 2024, the bank said.

International financing will remain the main source of coverage for the budget deficit, which will gradually narrow to 12% of GDP in 2024, from 25% of GDP in 2022, he said.

The main risk to the forecast is that the war could last longer than expected. In an alternative scenario, which assumes that security risks will last until mid-2024, GDP growth will be only 2-3% per year in 2023 and 2024.

Reporting by David Ljunggren, editing by Deepa Babington

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Christi C. Elwood