Ukraine's real GDP in 2015 will fall by 12 percent with inflation of 50.8 percent as of late 2015, according to the revised macroeconomic forecast published by the World Bank in its report on the Second Programmatic Financial Sector Development Policy Loan.
“We expect real GDP to decline by 12 percent in 2015, with a stronger contraction during the first half of the year, followed by a slowing decline during the second half of the year due to the low statistical base (given the deep decline during the second half of 2014),” the bank said in its report.
According to the report, the decline touches many sectors, especially the metal and mining sector which suffered from the conflict most of all. It is likely that the retail trade situation will worsen due to the large fall in the real income of population caused by the sharp increase in tariffs, large devaluation of the currency, and a decline in real wages. Also, problems in the banking sector are expected to continue, the World Bank’s experts said.
Combined with tighter liquidity in line with monetary policy objectives, this will imply a further contraction of credit during 2015 by 4 percent. On the external side, the positive impact of depreciation on exports will be undermined by conflict-related disruptions in major export industries and a decrease in the volume of trade with Russia.
The World Bank also revised its GDP growth for 2016 to 1 percent, with inflation slowing to 12.2 percent.
“Economic recovery is likely to set in later than initially projected and to be less pronounced,” the report said.
According to the report, GDP will increase by 2 percent in 2017 and 3 percent in 2018, while inflation will slow to 8 percent and 5 percent respectively.
The bank said that the deficit of Ukraine’s current account balance in 2015 will narrow to 1.1 percent of GDP, and it will be 1.4 percent of GDP in the next two years, while in 2018 it could grow to 1.6 percent of GDP.
The World Bank expects that the country’s state debt will grow from 70.3 percent of GDP to 93.5 percent of GDP with a gradual decrease to 81.1 percent of GDP in the next three years. Ukraine’s gross foreign debt could expand to 156.7 percent of GDP in 2015, and it could decrease to 126.8 percent of GDP by 2018.
