NBU forecasts 11% decline in Ukrainian economy in Q2 2020

The National Bank of Ukraine (NBU) in its Inflation Report for April 2020 forecasts that the Ukrainian economy will decline by 11% in annual terms, unemployment will rise to about 12% in seasonally adjusted terms, and wage growth will halt.
“Inflation in 2020 will stay within the 5% ± 1 pp target range. Price growth will pick up in the coming months, to end 2020 at 6%, primarily due to the hryvnia’s recent depreciation passing through to prices. Due to quarantine restrictions to combat the pandemic and the global crisis, the Ukrainian economy in 2020 will decline by 5.0%, but will return to the growth of about 4% in the following years. According to the NBU forecast, in April-June, the economy will shrink by 11% y-o-y, unemployment will rise to about 12% in seasonally adjusted terms, and wage growth will halt,” says the report released by the NBU press service.

The lifting of quarantine restrictions will lead to a rather rapid recovery of the Ukrainian economy in the second half of 2020. This will be facilitated by loose fiscal and monetary policies. Increased government spending to overcome the crisis, as well as the NBU’s measures to aid borrowers and to ramp up business lending, will decrease negative influence of the pandemic on the economy.

The introduction of quarantine measures, with an effective ban on certain activities, primarily affected the service sectors (in particular, tourism and entertainment), trade, and transportation. After quarantine, these sectors will partially resume activities but will still suffer from a slow recovery in household incomes. Tourism and related aviation services will be fully restored next year.

Along with the economic recovery in 2021, salaries will rise again and the unemployment rate will gradually return to the pre-crisis 8-9%. Consumer sentiment is expected to recover completely and private consumption will grow at a rate of 5-7% per year in 2021-2022, according to the Inflation Report.