Macroeconomic forecast: Consumer demand to ensure economic growth in 2020

News 30 october 2019 - 12:22

This release contains macroeconomic forecast for 2020 under the base case (most probable) scenario developed by the Research Department of Alfa-Bank Ukraine.

Key points

  • Economic growth in 2020 expected at 3%
  • Ukraine’s GDP should reach UAH 4.5 trillion in 2020
  • Inflation to continue slowing down to 6.3% at the end of 2020
  • FX market to remain stable: average annual exchange rate expected close to 2017-2019 levels

Detailed

We expect Ukraine’s economy to maintain moderate rate of growth in 2020, adding another 3% after 3.3% in 2019. This would be the fifth year of economic recovery in a row (only in 2000s, Ukraine did enjoy a longer growth period).

Ukraines GDP in 2001-2020, % real change

SourcesState Statistics Serviceforecast by Alfa-Bank Ukraine

Growing consumer demand should be the major driver for the economy next year. We also expect further expansion in investment, supported by maintained macrofinancial stability and declining interest rates. However, economic growth would be limited by global economic cool down, some worsening in terms of trade (that is, the ratio of prices for key exports and imports), limited foreign direct investment, cutbacks in margins of some big sectors, and tighter labor market with regard to demographic challenges.

Macrofinancial stability, coupled with tight monetary policy, low imported inflation, and limited current needs in upward reviews of administratively regulated prices would facilitate further slowdown in inflation. However, strong growth in wages and consumer demand would exert some upside pressure on prices. We expect the growth in Consumer Price Index (CPI) to slow down from current 7.5% to 6.3% at the end of 2020.

Consumer Price Index (CPIin 2017-2020, % annual change

SourcesState Statistics Serviceforecast by Alfa-Bank Ukraine

Economic growth, maintained macrofinancial stability, moderate fiscal deficit and declining interest rates would ease the debt burden for the state. According to our estimates, the public debt to GDP ratio will go down from 60.9% in 2018 to 52.7% in 2020.

At the same time, the need to roll over public debt in foreign currency is still a pressing one. In the next year, Ukraine needs to pay about USD 9 bln on its debt in foreign currency (including interest). This includes USD 3.7 bln on Eurobonds, USD 2.8 bln on local foreign currency T-bills (OVDPs), and USD 1.4 bln to the International Monetary Fund (IMF). That is why securing rollover of external public debt with funds from international financial institutions and improved access to global capital markets remains high on national policy agenda.

Key macroeconomic indicators


2017
2018
2019п
2020п
GDP, UAH bln
2984
3559
4022
4495
GDP, USD bln
112,2

130,8

153,8

168,6
GDP, % real change
2,5

3,3

3,3

3,0
CPI, % average annual change
14,4

10,9

8,5

6,7
CPI, % change Dec-to-Dec
13,7

9,8

7,4

6,3
Average wage, UAH ‘000
7,1

8,9

10,5

11,9
Average wage, % real change
19,1

12,5

9,2

6,0
Consolidated Budget balance, % of GDP
-1,4

-1,9

-1,9

-2,0
Public debt, % of GDP
71,8

60,9

54,3

52,7
Current account balance, % of GDP
-2,2

-3,3

-2,9

-3,4
USD/UAH, average annual
26,60

27,20

26,15

26,65

SourcesState Statistics ServiceNBUMinistry of Financeforecast by Alfa-Bank Ukraine

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