Bankers expect NBU to lower Ukraine GDP growth forecast for 2023

MOSCOW. Jan 26 (Interfax) - The National Bank of Ukraine (NBU) will lower its forecast for real GDP growth in 2023 from 4% to 1%-3.3%, while inflation is expected to slow to 19%-21% by the end of the year, bankers interviewed by Ukrainian journalists said.

"The October macro-forecast of the National Bank was too optimistic and projected GDP growth at 4% in 2023. But it became clear as soon as November that due to the damage of the energy infrastructure, the relevance of such estimates significantly decreased. Therefore, in my opinion, this forecast will be downgraded to more moderate figures of 3%-3.3%," Unex Bank CEO Ivan Svitek said.

The NBU tentatively expects inflation in Ukraine to slow to 21% by the end of 2023, Svitek said.

"Most likely, this estimate will not change significantly. On one hand, the slowdown in price growth and the less significant than expected impact on the electricity deficit at the end of last year does not give grounds to lower the forecast. On the other hand, there are still no grounds for excessive optimism," he said.

Konstantin Khvedchuk, a strategic development analyst at Pivdenny Bank, also expects the NBU to downgrade GDP growth forecast for 2023 to about 1% due to the damage caused to power infrastructure.

"The inflation forecast for 2023 may slightly improve (up to 19-20% year-on-year) as a result of expectations of lower energy prices. However, the forecast for the key rate is likely to remain unchanged, signaling that significant risks for inflation and the exchange rate remain," Khvedchuk said.

For his part, Alexei Blinov, the head of the analytical department at Sense Bank, said that according to the bank's baseline forecast, inflation will begin to slow down in the first quarter of 2023 and in the summer will likely stand at a level will be significantly lower than 20% in annual terms (against the current 26.6%).

"It is a fantasy to expect the monetary policy to be eased in the near future. The NBU also has other monetary instruments to influence the structural liquidity surplus, such as further raising the mandatory reservation limits, reinstating term certificates of deposit, and absorbing liquidity via OVGZ and currency interventions," Bank Credit Dnepr Deputy CEO Oksana Shveda said.

The latest changes as regards raising the mandatory reservation limits and the possibility of covering this OVGZ amount by 50% are a compromise solution between the NBU and the Finance Ministry, if the Finance Ministry "is not tempted" by the significant demand on the part of banks, and if primary auction rates remain unchanged or even increase depending on the maturity term of securities.

As reported, the NBU said in October 2022 it expected Ukraine's GDP to grow by 4% and inflation to slow to 20.8% in 2023.