Oxford Economics, an independent advisory firm, revised its estimate of Ukraine’s 2021 GDP growth from 4.4% in July to the more pessimistic 4% on Aug. 27.
The firm cited risks of additional lockdowns due to a low vaccination rate and the possible tightening of fiscal and monetary policies.
Ukraine has one of the lowest vaccination rates in Europe with less than 7% of the population fully vaccinated. Not only is there an insufficient supply of vaccines in the country, but there are still many people who are reluctant to be vaccinated. As a result, there may be a sharp increase in the COVID-19 cases in the upcoming months.
Disappointing Q2 data also prompted the global forecasting and quantitative analysis leader to cut Ukraine’s GDP growth prediction.
In the second quarter of 2021, Ukraine’s GDP grew less than expected, according to Trading Economics, a company providing data on economic indicators and financial markets. It increased by 5.4% compared to the same period in 2020, rebounding from a 2.2% contraction in the previous quarter but still underperforming the market expectation of 8% growth.
Oxford Economics also expects this year’s inflation rate to hit 9.2%, then fall to 6.7% in 2022 and 5.4% in 2023. Lower inflation will be good news for consumers, whose costs of living will not rise as quickly relative to their salaries. However, the firm also expects the hryvnia to weaken from Hr 28.4 per dollar in 2021 to Hr 29.3 in 2022 and Hr 29.4 in 2024.
Oxford Economics thinks Ukraine is unlikely to see any additional loans from the International Monetary Fund under the existing $5 billion Stand-by Arrangement this year.
