IMF retains Ukraine economic growth in 2018 at 3.2% y/y

IMF retains Ukraine economic growth in 2018 at 3.2% y/y
IMF retained Ukraine's economic growth in 2018 forecast at 3.2% / bne IntelliNews
By bne IntelliNews April 18, 2018

The International Monetary Fund (IMF) has retained its forecast for Ukraine's economic growth in 2018 at 3.2% year-on-year, and reviewed downwards the 2019 forecast to 3.3% y/y from 4% y/y, the multinational lender said in its World Economic Outlook published on April 17.

According to official data, Ukraine’s real GDP rose 2.5% y/y in 2017. The economic growth was fostered by the expansion of domestic consumer demand and high investment activity. The National Bank of Ukraine (NBU) forecasts real GDP growth to accelerate further to 3.4% y/y in 2018.

"Private consumption will remain the main driver of economic growth. First, real wages will continue increasing at a fast pace, spurred by intensive labour migration," the regulator said in a statement on April 12. "Second, the fiscal policy is easing on the back of higher social standards and other factors. Additionally, companies will continue to invest actively."

Real GDP growth is projected to slow to 2.9% y/y in 2019-2020, according to the NBU's expectations. "This will be due to fiscal easing effects wearing off and the central bank conducting a reasonably tight monetary policy to bring inflation back to the target," the central bank added. "However, economic growth could be higher if more decisive action is taken to implement structural reforms."

The IMF has also reviewed downwards Ukraine's consumer price growth forecast for late 2018 by 2 percentage points to 9%. By late 2019, the IMF expects inflation in Ukraine at the level of 6.5%.

In March, headline inflation in Ukraine continued to slow and stood at 13.2% year-on-year. At the same time, inflation exceeded the NBU’s targets, the regulator underlined. Core inflation was also elevated, at 9.4% y/y.

The NBU believes that "headline inflation will decline and return to the regulator's target range in mid-2019" to make 5.8% by the end of the year.  In 2018, inflation will decelerate gradually to 8.9% in December, albeit remaining above the target. In 2020, inflation will slow to 5.0%, thus hitting the central point of the target range (5.0% ± 1 percentage point).

"On the one hand, the hryvnia appreciation in the first quarter will curb price growth, primarily for non-food goods, and will thus contribute to core inflation declining faster than forecasted in January," the regulator added.

Data

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