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Alfa-Bank downgrades forecast for real GDP growth in Ukraine in 2021 to 3.7%, average annual inflation to 9.4%
(The title, paragraph 1 have been adjusted)
KYIV. Aug 26 (Interfax-Ukraine) – Alfa-Bank (Kyiv) has downgraded the forecast for real GDP growth in Ukraine in 2021 to 3.7% instead of 4.3% in the April forecast and the average annual inflation in 2021 to 9.4% instead of the previously predicted 8.5%, the press service of the bank reported to the Interfax-Ukraine agency.
According to the bank’s macroeconomic forecast, insufficient investment is one of the reasons for moderate expectations of growth in the Ukrainian economy next year and in the long term, in particular, according to the basic forecast trajectory, in 2022 Ukraine’s real GDP will grow by 3.5%.
The bank notes that in recent months the trend of economic recovery in Ukraine has been recorded, and it is expected that in the third quarter the economy will receive an additional impetus thanks to a record harvest (grain harvest is predicted in the amount of 79 million tonnes, which is 22% higher than the result of 2020).
It is indicated that the growth of the consumer price index in annual terms will be maintained at the level of 10-11% until the end of 2021 due to active consumer demand and high prices on external markets.
According to the macro forecast, powerful inflationary processes will push the GDP volume beyond the UAH 5 trillion mark already in 2021, while the UAH 4 trillion mark was passed in 2020.
In addition, the bank’s analysts predict that the consumer price index dynamics throughout 2022 will remain above the target range of the National Bank of Ukraine (NBU) – at the level of 4-6%.
"We expect consumer inflation to slow down smoothly throughout 2022, ending at 7%. And the average consumer price index growth in 2022 will be 8%, which is not much lower than the 9.4% expected by the end of 2021," the forecast says.
In addition, Alfa-Bank noted that the monetary reaction to the acceleration of inflation in 2021 adhered to a soft line of behavior, and the longer prospect of inflation returning to the target range compared to the regulator’s expectations will most likely mean a delay in the announced plans to return to the rate cut in 2022.
"In general, the level of interest rates in 2022 appears to be higher than this year," analysts said.
At the same time, it is indicated that due to the favorable pricing environment in external markets, Ukraine has been keeping the trade balance with a slight deficit for the second year in a row.
