New forecast: Ukraine’s GDP will drop by -7% due to pandemic
Ukraine’s economy will suffer hard due to the Covid-19 pandemic. That is the main result of a new economic forecast by the German Economic Team (GET), in cooperation with the Institute for Economic Research and Policy Consulting (IER), Kyiv.
GDP will shrink by -7% in 2020 as external and domestic shocks hit the economy. Before the pandemic, 3% growth was expected. In a pessimistic scenario with extended domestic lockdown measures and harder external shocks, the economy will even shrink by -11.2%. Despite the hard shocks, the economic decline will still be less than during the financial crisis in 2009. The reason for this is that good macroeconomic policy in the past years has made the economy more resilient and has created space for monetary and fiscal policy support. Stable government spending provides support to the economy despite dropping tax revenues, as a new IMF deal is now imminent. A cut in the NBU policy rate and a flexible exchange rate provide further support.