Dragon Capital halved the GDP growth forecast in 2024 to 4.0% y/y, expects the hryvnia exchange rate to be 39 UAH/USD by the end of next year.
This is stated in the company's message, Ukrainian News Agency reports.
"Given the dynamics of events on the front, we are revising our key assumption for 2024, expecting that the war is likely to continue throughout next year. A continuation of the war will mean that Ukraine's economy will not receive a boost from the partial return of refugees and improving economic sentiment, however the recent recovery of goods exports through Ukraine's Black Sea ports could become an important driver of economic growth," it said.
The company estimates that at least 46 vessels with a total cargo capacity of 1.85 million tons have called at Ukrainian Black Sea ports since the opening of the temporary corridor.
Most of them, namely 41 ships with a carrying capacity of 1.7 million tons, arrived at the ports of Odesa in October.
The ships arrived for loading with goods traditionally oriented to maritime logistics - agricultural and industrial (mainly iron ore and to a lesser extent metals and coal).
"According to our assessment, the full recovery of transportation through Black Sea ports can increase export revenue by USD 9-10 billion in 2024, which is a third more than in the scenario "without Black Sea ports", and have a positive impact on the growth of real GDP up to 5 percentage points. At the same time, inflation may increase by an additional 2.5 percentage points due to the secondary effects of the increase in domestic grain prices," the company emphasized.
However, as long as hostilities continue, the risk of damage to ships moving to Ukrainian ports in the Black Sea will remain relevant, so a full recovery of shipping through the ports is not expected.
Assuming that export volumes through the Black Sea ports will fluctuate between 1.5 and 3.5 million tons per month and expecting that the economy will receive support from the further development of the domestic military sector, the company forecasts that Ukraine's real GDP will grow by 4.0% y/y in 2024, compared to 8% previously expected in the early 2024 security risk reduction scenario.
At the same time, the growth forecast for 2023 remains unchanged at 4.5% y/y, as the latest available data confirm expectations that economic activity stabilized in the third quarter of 2023 after a gradual increase in the first half of the year.
"We expect that Ukraine's foreign partners will continue to financially support the country and, under the auspices of the IMF, will consolidate USD 40 billion in direct budget support next year. This should be sufficient to finance the budget deficit, provided that the government activates domestic borrowing and will contribute to the further growth of NBU reserves to USD 45 billion in 2024. This will allow the National Bank to continue gradually easing currency restrictions," Dragon Capital believes.
In addition, the company improved the forecast of the hryvnia exchange rate to the US dollar, expecting it to be 37 UAH/USD by the end of the current year (compared to the previous forecast of 37.5 UAH/USD) and 39 UAH/USD by the end of 2024 (compared to 41 UAH/USD), since in the conditions of the ongoing war, exchange rate stability will remain a key goal for the National Bank, despite the recent transition to a managed flexible exchange rate.
"Ultimately, we are lowering our end-2023 inflation forecast by 3.0 percentage points to 6.0% y/y, given a more substantial than expected decline in fundamental pressures in recent months and an increase in the forecast crop for certain crops (for example, vegetables, buckwheat). We forecast that in 2024 the inflation rate will accelerate to 8.0%, in particular due to the increase in domestic prices for agricultural goods as a result of the partial restoration of the Black Sea ports," Dragon Capital emphasizes.
As Ukrainian News Agency earlier reported, the National Bank improved the inflation forecast for the end of 2023 from 10.6% to 5.8% and GDP growth from 2.9% to 4.9%.
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