Economic Monitor Ukraine
After Ukraine’s economy declined by 29.1% in 2022, economic growth is further impeded by war-related factors in 2023. Real GDP is forecast to increase by 1.8% yoy.
Capital controls and significant international aid are important factors to keep the exchange rate stable. Also, a significant budget deficit (28% of GDP) requires international financial support to stop reliance on monetary budget financing. As the national bank stopped this financing policy in 2023, inflation slowly declined but risks remain. Significant cuts of the key policy rate are unlikely.
In this context, the IMF programme is not only a crucial step to close the fiscal gap but also to coordinate reform and international aid efforts for Ukraine’s economic recovery and reconstruction.
Overview
- Real GDP: After a decline of 29.1% in 2022, the economy has stabilized. Economic growth is impeded by war-related factors in 2023: forecast of moderate 1.8% growth
- External sector: Capital controls and significant international aid keep exchange rate stable
- Public finance: Significant budget deficit (28% of GDP) requires international financial support (USD 42 bn) to stop reliance on monetary budget financing
- Inflation: Slow decrease in inflation, but risks remain. Significant rate cuts unlikely
- MF programme: Crucial step to coordinate reform and international aid efforts; debt restructuring in the future very likely
- Foreign trade: Role of EU as trade partner deepens further during the war
Special issues
- EU grain ban: Ban covers USD 0.4 bn of exports per month, having a significant impact
- Banking sector: So far stable functioning, but war-impact will be revealed by asset reviews
- External migration: Ca. 5 m people in the EU. They are highly educated and 1/3 found work
- Economic reconstruction: The goal is to „Build Back Better“ linked with EU accession
