Ukraine's economy to contract by third in 2022 - NBU

The National Bank of Ukraine has predicted that Ukraine's economy will contract by a third in 2022.

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

"Ukraine's economy will shrink by a third in 2022, but if the Black Sea ports are unblocked, it will return to growth in 2023-2024," Shevchenko said.

He noted that Russia's all-out offensive had led to a sharp decline in economic activity in Ukraine. At the beginning of the war, a third of the enterprises stopped their activities. The reasons for this are the physical destruction and temporary occupation of entire regions, a high level of uncertainty and risks, the disruption of logistical and production ties, forced mass migration of the population. However, already in April, economic activity began to revive, with businesses and the population slowly adapting to the new operating conditions. This was also facilitated by the liberation of the northern regions and a decrease in the number of regions where active hostilities are taking place.

"As a result, in the second quarter, according to the estimates of the National Bank, the decline of the economy was close to 40%," Shevchenko said.

He noted that hostilities in the east and south, the destruction of infrastructure in other regions, the blockade of seaports and low demand in most sectors will restrain the recovery of the economy in the coming months. A significant contribution to the fall in GDP will be a decrease in activity in agriculture due to temporary occupation and mining of land, loss of equipment and grain elevators, as well as 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. A moderate strengthening of consumer demand, adjustment of technological and logistic processes and revitalization of investment activity, including thanks to the prospects of Ukraine's European integration, is expected after the active phase of the war is over.

"According to the expectations of the National Bank, the Ukrainian economy will be recovering in 2023-2024 at about 5-6% per year," Shevchenko said.

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