NBU expecting Ukraine's GDP to decline by third in 2022, growth of 5-6% in 2023-2024 provided ports opened

MOSCOW. July 21 (Interfax) - The National Bank of Ukraine (NBU) is estimating GDP decline of 40% in Q2 2022, but expects it to decline by a third in 2022 as a whole and recover by 5-6% in 2023-2024 provided Black Sea ports are unblocked.

A major contributor to the decline in GDP will come from weaker activity in agriculture, loss of equipment and elevators, and occasional untimely and insufficient treatment of land with fertilizers and plant protection products.

When the active phase of the crisis is over, it is expected that consumer demand will rise moderately, technological and logistical processes will be set up, and investment activity will revive, among other things, thanks to Ukraine's European integration prospects, the NBU said.

"However, in view of the large losses of production and human potential and the still-high security risks, the Ukrainian economy will recover at the rate of around 5%-6% per year in 2023-2024," the regulator said.

Ongoing military and financial assistance from Ukraine's international partner countries will enable the country to maintain its defense capabilities, while also meeting a significant portion of its budgetary needs in 2022.

Ukraine is expected to continue to actively work together with international financial organizations in 2023-2024, including through the launch of a new IMF program to support the balance of payments and macroeconomic stability.

Risks for the forecast could be prompted by a longer timeline of the crisis, unbalancing of state finances, increased emigration, which could threaten to reduce the labor force and have long-term negative effects on the labor market, and a global economic downturn.

The rapid approval and launch of a recovery plan for Ukraine, generating foreign investment inflows and substantial funding for the country's recovery projects, which could significantly accelerate economic growth and return inflation to its target more quickly than envisaged by the baseline scenario of the NBU's forecast.

According to Ukraine's State Statistics Service, GDP in Q1 2022 fell 15.1% year-on-year after growth of 6.1% in Q4 2021.

Ukraine's government expects GDP decline of no less than 35% this year.