National Bank of Ukraine slashes 2023 GDP growth forecast from 4% to 0.3%

MOSCOW. Jan 26 (Interfax) - The National Bank of Ukraine has slashed its 2023 GDP growth forecast to 0.3% from a previous 4%, Ukrainian media reported, quoting an NBU press release.

"The key assumption of the forecast is that security risks will start to decline significantly from early 2024 [but persist until then]," the NBU said.

The NBU has revised its key assumption of the security situation forecast due to the intensification of military activity. The full unblocking of sea ports and reductions in Ukraine's risk premiums have been delayed in the NBU's forecast.

The NBU has improved its inflation forecast for 2023 to 18.7% from the 20.8%.

It has lowered the 2024 GDP growth forecast from 5.2% to 4.1% but expects growth to quicken to 6.4% in 2025.

GDP could have fallen 30.3% in 2022, including by 35% in Q4, the NBU said.

It estimates GDP in nominal terms at UAH 4.825 trillion in 2022, better than its previous forecast of UAH 4.75 trillion. This year's forecast has been lowered from UAH 6.175 trillion to UAH 5,985 trillion, and next year's UAH 7.35 trillion to UAH 7.085 trillion.

Other risks that if materialized could require revisions in key macroeconomic indicators include the emergence of additional budgetary needs and substantial quasi-fiscal deficits in the energy sector on the back of the unpredictable nature of the situation; and the irregular arrival of external financing.

They also include complications in the operation of the grain corridor; and delayed returns by a large number of Ukrainians and potential additional migration abroad, which will depress consumer demand, while in the longer term, this threatens to aggravate structural problems on the labor market and decrease the country's economic potential.

That said, the rapid implementation of the recovery plan for Ukraine, supported by the arrival of official and private financing, could markedly speed up economic growth, the NBU said.