Dragon Capital has improved the forecast for GDP decline in 2023 by 4.5 percentage points to -0.5% (year to year).
This follows from a statement by the company, the Ukrainian News agency reports.
"We upgrade our 2023 real GDP forecast by 4.5 percentage points to -0.5% year over year due to a faster-than-expected normalization of the electricity market and a better-than-expected GDP performance in the third quarter of 2022," the press service quotes Olena Bilan, the director of the analytical department and chief economist of the company.
The power deficit caused by Russia's attacks on Ukraine's energy infrastructure decreased markedly in January and has been absent since the second decade of February, while our previous forecast suggested the absence of a power deficit only from April 2023.
Among the key factors that contributed to the accelerated improvement of the energy situation, it is worth noting the rapid repair of damaged equipment, including thanks to the technical assistance of foreign partners, the resumption of electricity imports from Europe in mid-January, and relatively warm and sunny weather in January and February, which caused early flooding and increased solar energy production.
The company does not expect the energy situation to deteriorate significantly until at least next winter, although localized consumption restrictions will occur due to the need for grid repairs and as a result of new Russian missile attacks.
The decrease in the electricity deficit caused a revival of economic activity.
Thus, the National Bank of Ukraine’s business activity expectations index rose to 45 points in February (on a scale from 0 to 100), rising from 42-43 points in the November-December period and almost returning to the September wartime maximum of 46 points.
January also saw an increase in steel production, iron ore mining, and rail transport turnover, against the background of a reduction in the electricity deficit and a more favorable external environment.
The updated forecast also takes into account the better-than-expected real GDP figure in the third quarter of last year.
As before, the company's forecasts are based on the assumption that the hot phase of the war will end at the end of the current year, which will be accompanied by the partial return of forced migrants and the opening of seaports for the transportation of all types of goods.
The company also expects that the operation of the "grain corridor" will be extended after March 18.
A longer duration of the war and the suspension of the grain corridor are the main risks to the forecast.
At the same time, the attraction of resources and the effective implementation of the "rapid recovery" program, as well as the launch of insurance against military risks, will contribute to a faster recovery of economic activity.
As the Ukrainian News agency earlier reported, the annual rate of economic decline in the third quarter of 2022 decreased to -30.8%, much better than the expected -35%.
Separate indicators published by the State Statistics Service at the beginning of this year indicate a partial recovery of economic activity in many sectors of the economy after a sharp decline in the first months of the war.
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