8 Dec 2022 19:13

NBU assumes worse macroeconomic outlook for Ukraine due to situation in energy sector

MOSCOW. Dec 8 (Interfax) - The National Bank of Ukraine (NBU) admits a downgrade of the country's macroeconomic forecast due to the situation in the energy sector, NBU Governor Andrei Pyshny.

"Several scenarios are being considered now. [...] In all three scenarios, we have common consequences: a decline and deterioration of the economic activity indicator and a higher inflation rate compared with the October forecast," he said at a press briefing on Thursday, according to Ukrainian media reports.

The first scenario assumes persistent problems in the energy sector, Pyshny said. In this scenario, the electricity shortage should not exceed 25%. The NBU views this scenario as the basic one, he added.

The second scenario involves a slow recovery and larger infrastructure damage, the NBU head said. In this situation, the shortage is growing.

The third scenario envisages largescale outages in the energy system, he said. At the same time, Pyshny noted that this scenario is considered by the NBU as the least probable.

"In all three scenarios we have similar consequences: a decline and deterioration of economic activity, a higher inflation rate than it was assumed in the October forecast. That is what we based our decision on, which we announced today. We have seen a slightly higher inflation rate, but it is lower than what the NBU forecasted in its October forecasts," the NBU head said.

The electricity shortage will increase inflationary pressure by one or two percentage points in 2023, he said. "And this may happen depending on a scenario that will be applied," Pyshny said.

As reported, the NBU said on October 8 that the inflation is under control and that it is expected to slow down from the second quarter of 2023.

The National Bank of Ukraine pointed out a negative impact of problems in the energy sector on the country's GDP, predicting its slightly deeper fall this year and a more sluggish growth next year.

"As for this year GDP, the decline is likely to be slightly deeper than it was expected in the October forecasts. Next year, even under our basic, relatively optimistic scenario (designed for the efficient protection of the power facilities and the prompt recovery of the system), the GDP growth will be very sluggish and much lower than that 4% we assumed in the October forecast," NBU Deputy Governor Sergei Nikolaichuk said at a press briefing in Kiev on Thursday, as cited by Ukrainian media.