IMF keeps Ukraine 2024 GDP growth outlook at 3-4%, improves inflation and public debt forecasts slightly

MOSCOW. March 22 (Interfax) - The International Monetary Fund updated its macroeconomic forecast for Ukraine during the Extended Fund Facility (EFF) third review, keeping its outlook for GDP growth in 2024 at 3-4% and slightly improving forecasts for inflation and public debt.

Ukrainian media reported with reference to a publication on the Fund's website that nominal GDP in 2024 could be UAH 7.75 trillion, compared with UAH 7.64 trillion expected in December last year; and UAH 8.86 trillion in 2025, unchanged.

This is largely due to the revision of the economic growth estimate for 2023 from 4.5% to 5% and, accordingly, nominal GDP from UAH 6.43 trillion to UAH 6.50 trillion.

The IMF now assumes domestic demand, private consumption and investment will make a slightly smaller contribution, but this is offset by a better net export situation.

The Fund lowered its inflation forecast for this year to 8.5% from 9.5%, and increased real income growth to 9.8% from 8.5%, although the unemployment estimate was worsened to 14.5% from 13.9%.

As for the budget deficit (excluding grants), the IMF now expects 20.2% of GDP this year, while it previously predicted 20.4%. In terms of budget financing, expectations for grant financing have been improved to 6.5% of GDP from 4.7%, while other external financing has been reduced to 11.8% of GDP from 13.7% and internal financing to 2% of GDP from 2.1%.

As a result, the forecast for total government debt at the end of 2024 was improved to 94% of GDP from 96.7%, which is also due to an increase in the estimate for end-2023 to 82.9% of GDP from 87.1%.

The new forecast for Ukraine's current account deficit in 2024 is 5.7% of GDP instead of 7.1% in December, and foreign direct investment is 2.2% of GDP versus 1.2%. The estimate of gross international reserves at the end of this year was increased to $42.1 billion from $40.9 billion.

The IMF on Thursday agreed to disburse a third EFF tranche of $880 million to Ukraine following a third review of the program.