NBU estimates Ukraine GDP growth in Q1 at 3.1%, downgrades forecast for 2024 to 3%

MOSCOW. May 6 (Interfax) - The National Bank of Ukraine estimates the growth of the country's real gross domestic product (GDP) in the first quarter of 2024 at 3.1%, while in January it was predicting it at 7.1%.

"Real GDP growth in the first quarter, according to NBU estimates, was weaker than expected, primarily due to restrained budget expenditures amid uncertainty regarding the flow of external financing. An additional factor was the blockade of the western border, which restrained the activity of certain types of activities," Ukrainian media reported, citing an inflation report published Friday on the NBU website.

Meanwhile, economic growth was supported by the stable operation of the sea corridor, favorable weather and increasing domestic demand. Ukraine's Central Bank said that fiscal policy remained loose and, together with the effect of a significant increase in budget spending at the end of 2023, significantly fueled aggregate demand.

Moderate GDP growth rates will continue until the end of 2024, the NBU said. According to updated forecasts, growth will accelerate to 3.7% in Q2 (in January the National Bank was forecasting 4.8%), after which it will slow to 1.3% in Q3 (previous forecast was 1.7%) and accelerate again to 4.1% (previously 2.0%) in Q4.

The NBU downgraded its growth forecast for the Ukrainian economy in 2024 as a whole to 3% from 3.6% in the January report, and lowered it to 5.3% from 5.8% for 2025. When forecasting, the NBU noted the negative contribution of electricity shortages and the insignificant impact of a smaller grain harvest due to the reorientation of agricultural producers to higher-margin crops, namely oilseeds.

Among the key risks in the forecast (with a strong impact and a probability of 25%-50%) are a longer duration and intensity of the conflict, greater budgetary requirements and greater damage to energy and port infrastructure. Meanwhile, the likelihood of the risks of a reduction in the volume and loss of rhythm in the flow of international assistance and the continued blocking of freight traffic across the border by individual EU countries is now reduced.

The Ministry of Economy estimated Ukraine's GDP growth in Q1 of this year at 4.5% in its forecast at the end of April.

The Ukrainian economy grew 5.3% in 2023 after a decline of 28.8% in 2022, the State Statistics Service said.