World Bank lowers 2023 GDP growth forecast for Ukraine to 0.5%

MOSCOW. April 6 (Interfax) - Ukraine's economy is projected to grow 0.5% this year after shrinking 29.2% in 2022, and to rise 3.5% next year, the World Bank said in an Economic Update for the region published on Thursday.

The World Bank said in January that it expected growth of 3.3% in 2023 and 4.1% in 2024.

"While the economic toll suffered by Ukraine is enormous, the reopening of Ukraine's Black Sea ports and resumption of grain trade, as well as substantial donor support, are helping support economic activity this year," the World Bank said in the new update.

GDP growth could quicken to 6.5% in 2025.

The updated forecast says this year's growth will be driven by the services sector, which could grow 2.9% after falling 20.3% last year; and industry, which could rise 1.5% after falling 60%; while agricultural output is again expected to fall, by 15% following last year's drop of 25%.

Inflation in Ukraine could slow in 2023 to 18%, from 26.6% in 2022. Last year's current account surplus of 5.7% of GDP will swing to a deficit of 4.5% this year as imports rise 20% and exports 15% in the total absence of incoming direct investment.

Ukraine's budget deficit could widen from 26.5% to 28.2% of GDP this year. Revenue might fall from 43.4% to 39.5% of GDP and public debt might rise from 78% to 97% of GDP.

The outlook for the country is "highly uncertain," the World Bank said.

Annual debt service payments - interest and amortization - are estimated at $17.6 billion equivalent in 2023, of which $15 billion stem from the amortization of short-term domestic debt.

"In the medium term, Ukraine will need to set the conditions for economic recovery by funding capital expenditure and by continuing critical institutional reforms," the World Bank said. "Considering these challenges, any stop or delay in external funding may lead to broad negative economic and social consequences," it said.

The IMF in early April forecast Ukraine's GDP growth this year at between minus 3% and plus 1%, but closer to the upper range; it expected growth of 3.2% next year.

The government of Ukraine also predicts GDP growth of 1% this year. The National Bank lowered its estimate to 0.3% in January, but recently said it was highly likely to revise it upwards due to a better-than-expected energy supply situation.