Oxford Economics forecasts GDP growth to 4.9% for Ukraine’s 2021

The British agency for global forecasting and quantitative analysis Oxford Economics has improved its forecast for Ukraine’s real GDP growth in 2021 to 4.9%, up from 4% in its February forecast.

As evidenced by the May forecast, the analysts have worsened their expectations for the growth of the Ukrainian economy in 2022 to 3.7% compared to the February forecast being 4.2%, and in 2023 they expect the decline in rates to continue – growth to 2.9%.

Strong growth in industrial production in April, a year after a series of lockdowns, marks a turning point that will see GDP grow by almost 5% this year, and then just over 3.5% in 2022, Oxford Economics said.

At the same time, the average annual hryvnia exchange rate in 2021 is expected at UAH 28.60/$1, in 2022 – UAH 29.30/$1, in 2023 – UAH 29.40/$1, according to Oxford Economics.

The analysts have raised their inflation forecast to 7.2% this year (in the February forecast it was 6.9%), and in the next two years they expect prices to rise by 4.9% and 5.2%, respectively.

The analysts continue to expect the current account to return to a deficit of 1.5% of GDP this year, while in 2020 the current account surplus reached 4% of GDP. According to their estimates, in 2022 and 2023 this indicator will remain in deficit and will amount to 2% and 1.7%, respectively.

Private investment is projected to recover cautiously, so the recovery will be more dependent on household and government spending. However, rising demand will push companies to further expand their production capacity from 2022.

Oxford Economics expects the budget deficit this year to be 4.6%, and in 2022 and 2023 it will decrease to 3.2% and 3.4%, respectively.

At the same time, the analysts predict a reduction in the ratio between public debt and GDP from 59.2% in 2020 to 56% in 2021, as well as to 52.4% and 49.7% in the next two years.

Oxford Economics expects Ukraine to be able to unlock the IMF program in the third quarter of 2021. At the same time, according to the forecast, political risks remain high.