Ukraine’s economy is set to return to growth in 2021, the European Bank for Reconstruction and Development (EBRD) says in its latest Regional Economic Prospects report, published. The Bank forecasts the country’s gross domestic product (GDP) to increase 3.5 per cent on the year in both 2021 and 2022. The major risks to its forecasts are the country’s slow progress on reform and vaccination.
A decline in foreign demand, combined with the impact of repeated lockdowns on domestic demand, caused GDP to decline 4 per cent in 2020. Improved macro-financial management proved an asset in the crisis, helping the country to maintain macroeconomic stability.
Dimitar Bogov, lead regional economist at the EBRD, said: “While the economy shrank by 2.2 per cent year on year in the first quarter of 2021 due to prolonged lockdown measures, there are indications that it is gradually returning to growth in the second quarter, benefitting from higher commodity prices.”
Ukrainian industrial production was up 1.5 per cent year on year and retail trade grew 14 per cent year on year in January-April, while exports and imports increased by 12 per cent and 11 per cent on the year, respectively, in the first quarter. Remittances also increased 7 per cent year on year in January-April 2021.
As EBRD notes, inflation has been accelerating this year on the back of rising global food prices, reaching 9.5 per cent year on year in May 2021. The increase in prices prompted the National Bank of Ukraine to raise its key policy rate twice, to 7.5 per cent, in April 2021.