Ukraine’s GDP to decline by a third in 2022 – the National Bank forecast
Losses of physical capital at the beginning of May reached $100 billion – the equivalent of 50% of GDP in 2021
What happened? Ukraine’s GDP will decline by at least a third in 2022 due to the war.
Source. This is stated in the report on financial stability of the National Bank.
Details. It is noted that macroeconomic and fiscal risks are now the highest due to the large-scale russian invasion.
During February–March, hostilities continued in the regions, which covered about half of Ukraine's GDP. As a result, production there has almost stopped, and consumption has fallen sharply in almost all regions.
Since April, the economy has been slowly recovering from the shock of the first weeks of the war. This is thanks to the liberation of the territories by the Armed Forces of Ukraine, the gradual return of workers, the establishment of production and supply.
As of mid-June, the territories, which generated about 20% of GDP last year, remain under the influence of active hostilities or occupation.
According to NBU polls, the percentage of enterprises that have reduced production capacity by one third or did not work at all, decreased from 61% in the first decade of March to 54% in late May.
The cessation of the war and the deoccupation of the territories are expected to contribute to the rapid recovery of GDP in the coming periods. Instead, delaying it is a key risk.
According to the NBU, the loss of physical capital from the destruction of enterprises, housing and infrastructure in early May reached $100 billion – the equivalent of 50% of GDP in 2021. The loss of human capital due to migration and the death of citizens is also very significant. Due to high uncertainty, investment activity has actually been suspended.
Previously. Mind discussed with the Minister of Finance of Ukraine Serhiy Marchenko forecasts on domestic GDP and hryvnia exchange rate, problems of filling the state budget and tax revenues, as well as the effectiveness of economic sanctions against russia.
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