NBU improves Ukraine's 2023 GDP growth outlook to 2.9% from 2%

MOSCOW. July 27 (Interfax) - The National Bank of Ukraine has improved its forecast for the country's GDP growth in 2023 to 2.9% from 2%, but worsened the 2024 growth outlook to 3.5% from 4.3%, Ukrainian media quoted the NBU as saying in a press release.

The key risk to inflation dynamics and economic development is still the longer duration and the unpredictable nature of the military operation, and the NBU's new forecast is based on the assumption that security risks will decline considerably in mid-2024 rather than at the beginning of next year.

Other significant risks include international aid arriving in reduced amounts or on a less regular basis; resumption of significant power shortages; stronger needs to imports electricity and, consequently, higher pressure on the FX market

The risks include limits to export logistics, the emergence of additional budget needs and substantial quasi-fiscal deficits, including in the energy sector.

The new macroeconomic forecast is based on the conservative assumption that the grain corridor will remain non-operational. The resumption of its operation or the expansion of alternative routes will help expand export opportunities, facilitating more robust economic recovery.

The implementation of large-scale projects for Ukraine's recovery could speed up economic growth, the NBU said. At the same time, a faster than currently expected decline in security risks could have the most significant positive impact on economic development.

The NBU now forecasts real GDP growth at 6.8% in 2025, up from a previous forecast of 6.4%.

The estimates of nominal GDP altered marginally, from UAH 6.51 trillion to UAH 6.525 trillion rubles in 2023, from UAH 7.7 trillion to UAH 7.62 trillion in 2024 and from UAH 8.91 trillion to UAH 8.83 trillion in 2025.