Ukrainian economy could return to pre-war levels not earlier than in 2026

Artem Shcherbyna, chief investment officer, head of R&D Capital Times

According to our core scenario* nominal GDP of Ukraine is estimated as $145 bn (muсh lower from $200 bn in 2021) and the real GDP could decrease by 34% in 2022. Looking forward, the Ukrainian economy will be developing between $130-160 bn in 2023-2024 and recieving great amounts of financial support from external funds for budget finacing and infrastructure reconstruction.

Even though the new wave of the war escalation is not in our core scenario we see Ukrainian economy to return to pre-war levels not earlier than in 2026. Besides, Ukraine started recovering in the situation of three FX rates on the money market: official (the NBU), banking and cash market. The NBU will hold PEG policy till the end of active military actions on the territory of Ukraine in II-III quarter of 2023, according to our view. But the hike in official USDUAH rate is very likely within next 6 months.

Military spendings increased shaprly from 6-9% to 30-40% per month in government budget structure. This tendency won’t end till the war continues in Ukraine. Budget deficit has been increasing since March, and reached 348 bn UAH (or $11.9 bn) at the end of June. Ministry of Finance did good job with creditors and has stabilizet government budget in spending section. We assume that the budget deficit would not exceed 500 bn UAH till December when it could increase to 800 bn UAH (or $21.9 bn) due to a traditional government spendings hike. If so the budget deficit could represent 17% of Ukraine’s GDP.

In social segment the war led to the huge 35-percentage spike in unemployment rate. Significant share of Ukrainian population has lost their jobs due to the deep economic turmoil and