The main drivers of economic growth in Ukraine in 2017 will increase consumption and investment in fixed capital. This forecast was voiced by analysts of the ICU group.
Experts estimate the GDP growth in Ukraine in 2016 in the amount of 1,5-1,6%, and in 2017, predicts economic growth of 2.3%.
“In 2018, the GDP growth will accelerate to 3% and from 2019 the economy will on the average increase of 4%,” – said the head of analytical Department ICU Alexander Valchyshen.
According to Valchyshen, the main driver of the economy in 2017 will be the growth of domestic demand, which will be ensured by keeping the proportion of the state expenditures at the level of 30% in relation to GDP and growth of investments in fixed capital.
“The increase in government spending through the budget is a key element of maintaining domestic demand in the economy. The export-oriented sector in the current environment can not yet be a catalyst for economic recovery, so the government is taking measures to increase domestic demand, including consumer, now accounting for 68% of GDP, said Valchyshen.− Domestic demand will be provided by the internal offer of goods or services. In addition, we should expect the recovery in the purchasing power of households. This is good news for construction, engineering industries and their related segments”.
Valchyshen sure that the restoration of the purchasing power of households will be affected under the budget-2017 minimum wage increases.
“Increase the minimum wage from 2017, we assess as a positive step that the government is trying to reverse the trend of the last two years, when the share of wages in the income structure of GDP has dropped to historic lows (38,3% in the 3rd quarter of 2016), said Valchyshen. − At the same time, the proportion of profit of economic entities of all ownership forms is at maximum (45%). Before the economic crisis 2014-2015, this ratio was 54%/36%, respectively. That is, in 2014-2015 double-compression – the decline in nominal GDP, and at the same time decreased and the part that was accounted for by wages.”
According to forecasts of the ICU, the average inflation rate in 2017 will be within 10%.
“Until the end of February inflation will be 12% and then start to slow down. NBU will have room to cut interest rates – it will reduce them moderately throughout the year, to the level of consumer inflation + 2 percentage points,” said Valchyshen.
He stressed that the situation on foreign markets will not have a significant supporting effect on the Ukrainian economy because of the prolonged economic crisis in the CIS (where a wave of devaluations and recession) and political risks in the EU, where the economy is growing, but at a moderate pace.