NBU retains GDP growth forecast by 3.6% and improves inflation forecast by 1.2 pp to 8.6% in 2024

The National Bank of Ukraine (NBU) retained the GDP growth forecast by 3.6% and improved the inflation forecast by 1.2 percentage points to 8.6% by the results of 2024.

This is stated in the message of the NBU, Ukrainian News Agency reports.

According to reports, inflation will be within the target range of 5% ± 1 pp in the coming months.

From the middle of the year, it will accelerate somewhat due to the exhaustion of the effects of last year's high harvests.

Further pressure on prices will come from a further recovery in consumer demand, as well as the pass-through of business costs to consumer prices, in particular due to still high security risks and rising wages.

However, inflation will remain moderate, including thanks to the NBU's measures to ensure exchange rate stability and the attractiveness of hryvnia assets.

It is expected to be 8.6% at the end of the year.

Inflation will return to the target range in 2025, slowing to 5.8% by the end of the year, and to the 5% target in 2026.

This will primarily be facilitated by the reduction of security risks assumed in the forecast.

This will provide an overall improvement in expectations, as well as allow for better logistics and production processes.

Interest and currency policy measures of the NBU will remain important factors in reducing price pressure.

The economy recovered throughout last year thanks to the high adaptability of business and the population to the conditions of the war and a soft fiscal policy supported by large-scale international financing.

In the fourth quarter, real GDP growth exceeded expectations primarily due to higher harvests of late crops and the development of alternative export routes.

This became the basis for improving the estimate of real GDP growth in general for 2023 - up to 5.7%.

Despite the war, economic growth will continue.

In 2024, real GDP will grow by 3.6% primarily due to the maintenance of high budget expenditures against the background of the expected volume of international aid at a sufficient level.

However, the rate of economic growth will be lower than last year, due to the expected decrease in harvests and the strengthening of disparities in the labor market in the conditions of the war.

In 2025-2026, economic growth will accelerate to 4-6% per year thanks to the reduction of security risks, which is the main assumption of the NBU forecast, the improvement of consumer and investment sentiments, and the implementation of European integration reforms.

In the post-war period, soft fiscal policy will continue to support the economy, while the budget deficit will be significantly reduced thanks to the strengthening of the domestic resource base.

As Ukrainian News Agency earlier reported, in 2023, consumer prices rose by 5.1%.