Oct 27 (Reuters) – Ukraine’s economy will contract by almost 32% this year and annual inflation will accelerate to 30%, mainly due to the damage from the Russian invasion, Ukraine’s central bank said on Thursday.
Assuming security risks decrease and demand picks up, gross domestic product will grow at about 4% to 5% a year in 2023 and 2024, the bank said in a quarterly inflation report.
“This year’s economic downturn was caused by lower domestic demand, disrupted logistics and large losses in labor and productive potential from the war,” it said, predicting that the unemployment rate would reach 30% this year.
“Fiscal policy is unprecedentedly accommodative and will remain so through the end of 2024. This will support the economy during the war and, together with mitigating security risks, will contribute to economic recovery.”
Inflation – currently at nearly 25% – is likely to fall to 21% next year and fall below 10% in 2024, the bank said.
International financing will remain the main source to cover the budget deficit, which will gradually narrow from 25% of GDP in 2022 to 12% of GDP in 2024, it said.
The main risk to the forecast is that the war could last longer than expected. In an alternative scenario, which assumes security risks will continue into mid-2024, GDP growth will be only 2% to 3% per year in 2023 and 2024. (Reporting by David Ljunggren, Editing by Deepa Babington)
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