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Alfa-Bank Ukraine expects country's economy to shrink by one third in 2022 with inflation rising to 20-22%
KYIV. May 2 (Interfax-Ukraine) – Ukraine’s real gross domestic product (GDP) in 2022 will decrease by 33%, the main factors of the decline will be massive losses in production, demand and exports, according to the updated macroeconomic forecast of the analytical department of Alfa-Bank Ukraine.
"A collapse in imports, large fiscal spending and stockpiling will hold Ukrainian GDP back from a bigger downturn," the document says.
According to it, the growth of the consumer price index (CPI) will accelerate from current 13.7% to 20-22% in mid-2022. Inflation is expected to remain at this level in the future.
"Inflation containment will contribute to the weakening of consumer demand, the formation of a forced balance of basic food products and the government’s refusal to revise administratively regulated tariffs," according to Ukrainian Alfa-Bank.
According to the head of the bank’s analytical department, Oleksiy Blinov, the National Bank of Ukraine will refrain from trying to adjust inflation with an interest rate in 2022.
"During the war, the conventional rules of monetary policy have lost their relevance. Today, the absolute priority of monetary policy is not inflation, but support for the economy and operational financial stability. Therefore, we expect the NBU refinancing rate to remain unchanged at 10% per annum throughout 2022," he said.
As reported, according to the World Bank, which before the war expected the Ukrainian economy to grow by 3.2% this year, it will fall by 45.1% with inflation of 15%. According to its report from early April, the Ukrainian economy is expected to recover by only 2.1% in 2023, which is also worse than previous expectations of 3.5%.
The National Bank of Ukraine predicts a decrease in the country’s GDP this year by at least one third, refusing to make more detailed estimates. The IMF expects a 35% decline.
