10 Oct 2023 15:22

IMF expects Ukraine's economy to grow 2% in 2023, 3.2% in 2024

MOSCOW. Oct 10 (Interfax) - The International Monetary Fund has now returned the long-term forecast for Ukraine to its World Economic Outlook, while from February 2022, the WEO gave only a forecast for the current year.

"Ukraine's projections for 2024-28, in line with the [EFF] program's baseline scenario, are now included," Ukrainian media reported, quoting the WEO: Navigating Global Divergences macro forecast released on Tuesday.

In previous WEOs, the fund indicated that "for Ukraine, all forecasts for 2024-2028 are omitted due to an unusually high degree of uncertainty."

According to the updated macro forecast, the IMF expects Ukraine's GDP to grow by 2% in 2023 and accelerate to 3.2% in 2024. According to the fund, the Ukrainian economy will grow by 4% in 2028.

IMF Mission Chief for Ukraine Gavin Gray said last week that there were plans to update the macroeconomic framework as part of the second review of the EFF program.

His deputy Natan Epstein recalled that the IMF in June improved its forecast for Ukraine's GDP growth this year from the range of -3% to +1% to +1% to +3%. He said the Fund currently estimates economic performance closer to the upper end of this new range. He added that the fund is still sticking to the base scenario, according to which the military operation will end in the middle of next year.

The macro forecast for Ukraine published in WEO from the baseline scenario of the EFF program so far suggests a decrease in inflation from 26.6% last year to 15.5% this year and to 10% next, although by the end of September it had already dropped to 7.1%.

As for the current account balance, the IMF's WEO forecasts a deficit of 5.7% of GDP this year, following a surplus of 5% of GDP last year, widening to 7.2% of GDP next year and narrowing to 3.8% of GDP in 2028.

The four-year EFF for Ukraine was approved on March 31, 2023 and the first tranche of $2.7 billion was released in early April. The program calls for the release of another three tranches of 664 billion SDR or about $900 million at current exchange rate after IMF missions assess Ukraine's fulfilment of obligations as of the end of April, June and December. The country received the second tranche in July.

An IMF mission started work on the program's second review in Warsaw on September 25. Given a positive conclusion from mission experts, a decision on releasing the third tranche is expected to be made in the second half of October or in November. However, Ukraine has still not met all the structural benchmarks of the program needed for the second review on its fulfillment.