30 Jan 2023 14:45

Ukraine's Econ Ministry standing by 3.2% GDP growth forecast for2023 for now

MOSCOW. Jan 30 (Interfax) - Ukraine's Economy Ministry is standing by its forecast for 3.2% GDP growth in 2023, despite the National Bank of Ukraine lowering its growth outlook from 4% to 0.3% last week, Ukrainian media reported, quoting First Deputy Economy Minister Denys Kudin.

"Our forecast is 3.2% growth in 2023, so far we are not adjusting it," he said during the annual Ukraine Economic Outlook conference, broadcast on YouTube.

Kudin said Ukrainian businesses had managed to adapt to the new conditions of power outages better than expected. For example, if the Economy Ministry initially predicted GDP had fallen 37% in December, now the drop is estimated at 35%.

He said the ministry, together with Ukrenergo and regional power companies, had managed to directly provide relatively acceptable working conditions for about 1,000 large industrial consumers, taking into account their underutilization and readiness to change work schedules, including night shifts.

"So we are not worsening our forecast due to energy," Kudin said, but added that the risk of power outages was still one of the main risks in 2023.

The National Bank estimates GDP shrank 30.3% in 2022, including by 35% in Q4.

Kudin also said he considered the government's improved inflation forecast for 2023 from 20.8% to 18.7% to be optimistic, while the state budget was based on a 28% forecast, and inflation this year was estimated at 22.5% in the Memorandum with the IMF.

"This is an optimistic figure, but I would like it to be so," Kudin said, commenting on the new inflation forecast from the National Bank.

But he said there were grounds for lower-than-expected inflation forecasts in the autumn, in particular a drop in world gas prices from $1,300 to $900 per thousand cubic meters.

Kudin also said he considered the National Bank's view of the balance of payments to be too pessimistic. "The NBU has more tools to correctly predict this indicator, but, according to our estimates, it is different. We will close January soon and we will see the results," he said.

In his opinion, the outflow of funds from Ukraine using payment cards in 2023 could fall by half or two-thirds due to the reduction in the savings of Ukrainian citizens who left the country, while the picture is different in terms of receipts by Ukraine which might reach the usual monthly $1 billion.

Asked about the hryvnia's exchange rate, Kudin said there could be some devaluation, and that the National Bank might also have factored this into its forecast.

"I would not particularly consider revaluation to be an option. We believe that the main trend will be devaluation, but soft, gradual, non-critical and one that will generally correspond to the internal situation," he said, adding he was confident the National Bank would keep the currency market situation under control and continue to pursue its fixed exchange rate policy.