National Bank of Ukraine makes no assumptions about crisis duration in baseline scenario, brings alternative scenario back

MOSCOW. April 26 (Interfax) - The National Bank of Ukraine, which earlier included a certain timeframe for "a tangible improvement of security levels" in the baseline macroeconomic forecast, has changed the approach and presented an alternative scenario in the inflation report.

"At this point, we have every reason to focus on an analysis of the economic element. We actually shift the focus from the date to the impact. We understand and can see that the economy has adapted to some extent," Ukrainian media quoted Bank head Andrei Pyshny as telling a monetary briefing on April 25.

The baseline macroeconomic forecast, issued in January, allowed for a significant improvement of security levels starting from 2025, and the stance was reaffirmed at a monetary briefing in mid-January. Now the Bank says it "allows for a decline in risks and normalization of economic conditions in the forecast horizon." It published a forest for the period through 2026.

"We make no assumptions regarding the timeframe and course [of the crisis]. We analyze the macro-financial situation. In particular, we state that the economy has adapted to the new conditions to some extent. [...] We make an assumption regarding the potential influence of the security levels on the economic development," Pyshny said.

By and large, the current approach is not drastically different from the earlier one, he said.

National Bank of Ukraine deputy head Sergei Nikolaichuk said, for his part, that the Bank had never suggested when the crisis might end but mostly focused on macroeconomic consequences of assumptions on changes in security risks.

"Therefore, our current communication slightly shifts the focus. We do not concentrate on the specific dates when we might see a change in the dynamics of security risks but largely focus on macroeconomic consequences of the gradual normalization of environment for operation of economic agents," Nikolaichuk said.

Based on this, certain assumptions can be made regarding how the National Bank sees the corresponding evolution of security risks in the baseline and alternative scenarios, which it intends to publish in the inflation report. Nikolaichuk said.

As reported, the first inflation report issued by the National Bank in 2022 presented a baseline scenario and a negative scenario with a longer period of crisis. The negative scenario was scrapped later, despite the fact that the International Monetary Fund (IMF) continues to provide such scenarios.