NBU predicts GDP slowdown to 3.1-2.3% in the third and fourth quarters

The National Bank of Ukraine has estimated real gross domestic product (GDP) growth in the second quarter of 2024 at 3.7% year-on-year, which is in line with its April forecast.

This is stated in the National Bank's Inflation Report, UNN reports .

In the second quarter of 2024, the NBU estimates that GDP growth remained relatively high (3.7% yoy). It was supported by increased budget expenditures and a faster-than-year harvest of early grain crops

The National Bank of Ukraine reports that the Ukrainian economy showed significant growth in early 2024. Real GDP in the first quarter grew by 6.5% year-on-year, significantly exceeding the NBU's forecasts set out in the April 2024 Inflation Report. One of the key factors behind this development was the stable energy situation, which contrasted with the significant electricity shortages seen in January-February 2023. This contributed to an increase in the production of goods and services in various industries, and led to high annual growth rates in the energy sector.

In addition to the exhaustion of the effect of a low comparison base, the slowdown in growth is primarily due to the destruction of Russia's energy infrastructure and prolonged power outages. Additional losses in the energy sector in May-June, as well as higher levels of electricity consumption, particularly in the summer of this year, led to a downgrade of assumptions about the electricity deficit both in the second quarter and over the forecast horizon. Economic activity in the second quarter was also constrained by growing staffing problems and an increase in air alerts

According to the NBU, businesses and households are now better adapted to the electricity shortage compared to 2022-2023. In addition, the NBU managed to cover part of the electricity demand by increasing its imports. These and other factors helped to maintain positive dynamics in several sectors in the second quarter of 2024, including metallurgy and transportation. High demand for fertilizers from farmers helped support the chemical industry. Sales of energy autonomy products, restaurant traffic, and demand for courier services also increased due to electricity shortages.

In the second half of the year, economic activity will continue to decelerate, primarily due to higher energy deficits. The shift of the early grain harvest to June will affect agricultural and economic activity in general in the third quarter. At the same time, better-than-expected results in the first quarter of 2024, slightly higher crop estimates due to an increase in planted areas, and a wider budget deficit led to an improvement in the forecast for real GDP in 2024 to 3.7%

The NBU forecasts Ukraine's GDP growth at 3.7% in the second quarter of 2024 and expects it to slow to 3.1-2.3% in the third and fourth quarters.

Recall

National Bank Governor Andriy Pyshnyy says that Ukraine's economic recovery will continue, although it will be limited due to the war and significant damage to the energy system - the economic growth forecast for this year has been improved to 3.7%.