Ukraine’s economy will shrink by a third in 2022

The National Bank of Ukraine has predicted that the Ukrainian economy will shrink by a third in 2022.

NBU Governor Kyrylo Shevchenko said so during a briefing on Thursday, according to a Ukrinform.

“The Ukrainian economy will contract by a third in 2022, but if the Black Sea ports are unblocked, it will return to growth in 2023-2024,” Shevchenko said.

He noted that Russia’s all-out offensive had led to a sharp drop in economic activity in Ukraine. At the start of the war, a third of the companies ceased their activities. The reasons for this are the physical destruction and temporary occupation of entire regions, a high level of uncertainty and risks, the disruption of logistical and production links, the forced mass migration of the population. However, already in April, economic activity began to pick up, with businesses and the population slowly adapting to the new operating conditions. This has also been facilitated by the liberation of the northern regions and a decrease in the number of regions where active hostilities are taking place.

“As a result, in the second quarter, according to National Bank estimates, the decline in the economy was close to 40%,” Shevchenko said.

He noted that the hostilities in the east and south, the destruction of infrastructure in other regions, the blockade of seaports and weak demand in most sectors will hamper the recovery of the economy in the coming months. . A significant contribution to the decline in GDP will be a drop in activity in agriculture due to temporary occupation and mining of land, loss of equipment and grain elevators, as well as the sometimes untimely and insufficient treatment of the land with fertilizers and phytosanitary products. As a result, the economy will contract by a third this year. A moderate strengthening of consumer demand, an adjustment of technological and logistical processes and a revitalization of investment activity, in particular thanks to Ukraine’s European integration prospects, are expected after the end of the active phase of the war.

“According to the expectations of the National Bank, the Ukrainian economy will recover in 2023-2024 at around 5-6% per year,” Shevchenko said.

Real GDP growth in Ukraine in 2021 reached 3.4% after a decline of 4% in 2020.

Christi C. Elwood