EBRD Affirms Ukraine's 2017 GDP Growth Forecast Of 2%

The European Bank for Reconstruction and Development has affirmed its forecast that Ukraine's GDP will grow by 2% in 2017.

This is said in the latest economic forecast of the EBRD published in the frames of the EBRD Annual Meeting underway in Cyprus, Ukrainian News Agency reports.

The European Bank for Reconstruction and Development expects Ukraine's GDP to grow by 2% in 2017 and 3% in 2018.

"Ukraine's economy stabilized in 2016 and embarked on a moderately-paced recovery. GDP grew by 2.3 per cent for the year as a whole, driven by a rebound in domestic demand from the low base of the previous two years. In 2016, household consumption grew by 1.8 per cent in real terms. Investment in fixed assets, which increased by approximately 20 per cent in real terms in 2016, was funded mostly from enterprises' own earnings while foreign direct investment, bank lending and public infrastructure spending remained weak," reads the document.

The EBRD notes that Ukraine's export of goods and services declined by 1.6% in real volume terms in 2016 over 2015.

According to the EBRD, in the first quarter of 2017, Ukraine's industrial production contracted by 0.7% year over year, affected by the cargo transportation blockade of the area that is currently beyond the control of the Government of Ukraine.

The EBRD believes that the blockade will affect GDP growth and balance of payments in the near term.

"Consumer price inflation picked up from an average of 13.9 per cent year-on-year in 2016 to 15.1 per cent year-on-year in March 2017. The National Bank of Ukraine expects to bring it down to single digits by the end of 2017. The current account deficit widened from almost zero in 2015 to 4.1 per cent of GDP in 2016, reflecting the recovery of domestic demand and weak exports. PrivatBank, the largest bank in Ukraine, was declared insolvent and nationalized in December 2016 without major disruptions to the broader economy. The hryvnia exchange rate remained predominantly stable in the wake of the nationalization. The combined general government and Naftogaz deficit stood at an estimated 2.3 per cent of GDP in 2016, below the initially planned deficit target of 3.7 per cent of GDP. In 2017, it is planned to widen somewhat to 3.0 per cent of GDP. We forecast the Ukrainian economy to grow by 2.0 per cent in 2017 and 3.0 per cent in 2018," reads the document.

As Ukrainian News Agency earlier reported, in March 2017, following a decision on the trade blockade of trade with the occupied territories of Donbas the National Bank of Ukraine revised downward the outlook for GDP growth in 2017 to 1.9%.

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