The Ukrainian economy is expected to shrink by a third in 2022

The National Bank of Ukraine predicts that the Ukrainian economy will shrink by a third in 2022.

NBU Governor Kyrylo Shevchenko said so at a briefing on Thursday, according to Ukrinform.

“Ukraine’s economy will shrink by a third in 2022, but if the Black Sea ports are released, it will grow again in 2023-2024,” Shevchenko said.

He pointed out that Russia’s all-out offensive has led to a sharp drop in economic activity in Ukraine. At the beginning of the war, a third of the companies went out of business. The reasons for this are the physical destruction and temporary occupation of entire regions, a high level of insecurity and risks, the disruption of logistics and production links, forced mass migration of the population. However, economic activity picked up as early as April, and companies and the population slowly adjusted to the new framework conditions. This was also facilitated by the liberation of the northern regions and a reduction in the number of regions where active hostilities are taking place.

“As a result, according to estimates by the National Bank, the decline in the economy in the second quarter was almost 40 percent,” Shevchenko said.

He noted that hostilities in the east and south, destruction of infrastructure in other regions, blockade of seaports and low demand in most sectors will hamper economic recovery in the coming months. A significant contributor to the decline in GDP will be a decline in agricultural activity due to temporary occupation and mining of land, loss of equipment and grain elevators, and sometimes untimely and insufficient treatment of land with fertilizers and plant protection products. As a result, the economy will shrink by a third this year. After the end of the active phase of the war, a moderate strengthening of consumer demand, an adjustment of technological and logistic processes and a revival of investment activity are expected, also thanks to the prospects of Ukraine’s European integration.

“According to the National Bank’s expectations, the Ukrainian economy will recover by about 5-6% per year in 2023-2024,” Shevchenko said.

Real GDP growth in Ukraine reached 3.4% in 2021 after a 4% decline in 2020.