The EBRD lowered the forecast for the recovery of Ukraine's economy in 2023 to 8%

29.09.2022, 12:47 mind.ua

What happened? The European Bank for Reconstruction and Development (EBRD) lowered the forecast for the growth of Ukraine’s economy in 2023 from 25% to 8%. Source. The report of the EBRD. Details. Europe expected from Ukraine that significant reconstruction work would already be underway at this point. Considering this, the forecast was changed. Instead, the indicator of GDP reduction remained unchanged – a drop of 30% is expected. The bank estimated that the fighting has become more concentrated in recent months and has engulfed an area that generates only about 20% of GDP. The destruction of human capital, infrastructure, and productive capacity significantly influenced the indicators though. It is also noted that economic activity has been severely disrupted, even in regions without active hostilities. This is due to logistical challenges, financial difficulties and lack of adequate labour. In addition, as of mid-August, 15% of Ukrainians left the country, while another 15% were displaced internally. “russia’s blockade of ports, hampering agricultural exports, and the devastation of many steel-producing facilities in the east of the country have decimated the country’s two main exports, which generated almost half of all pre-war export revenues,” the EBRD emphasised. The bank adds that the country’s initial high reliance on monetary financing of the fiscal deficit amid a significant external financing gap had depleted foreign reserves by 20% as of July 2022, even despite capital controls being in place. The situation has started to improve, however, because of higher inflows of external financing in August and September. As a result, foreign reserves had recouped half of their losses by the end of August. The resumption of grain exports from some ports and the expectation of sufficient external financing could be positive factors for economic activity by the end of this year.