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Dragon Capital improves forecast of GDP recession in 2023 by 4.5 p.p. – to 0.5%

KYIV. March 6 (Interfax-Ukraine) – Dragon Capital due to the fastest than expected normalization of the situation with energy supply improved its forecast for the recession of the real gross domestic product (GDP) by 4.5 percentage points – from 5% to 0.5%, the investment company said.

“We improve our forecast for the real GDP for 2023 by 4.5 percentage points – to 0.5% due to the fastest than expected normalization of the situation in the electricity market and the better than expected the GDP indicator in the third quarter 2022,” director of the analytical department and chief economist of the company Olena Bilan said.

Dragon Capital clarified that the energy deficit caused by Russian attacks on the Ukrainian energy infrastructure was significantly reduced in January and was absent from the second decade of February, while the preliminary forecast of the company suggested a lack of electricity deficiency only from April 2023.

“We do not expect a significant deterioration in the situation in the energy sector, at least until the next winter, although localized consumption restrictions will take place due to the need to repair the network and as a result of new Russian missile attacks,” the report said.

According to him, a decrease in electricity deficiency caused a revival of economic activity. In particular, the NBU business activity expectations index increased from 42-43 points in November-December to 45 points in February (on a scale of 0 to 100), almost returning to the September maximum of the war at the level of 46 points. Also in January, an increase in the production of steel, the extraction of iron ore and the turnover of railway transport against the backdrop of a decrease in electricity deficiency and a more favorable external conjuncture was noted.

In addition, Dragon Capital added the updated forecast takes into account the best than expected real GDP indicator in the third quarter of last year: according to the State Statistics Service, the decline amounted to 30.8% instead of the expected 35%.