Gontareva told what will happen to the economy of Ukraine, if continued blockade of Donbass

If the blockade in the Donbass will cease in the near future, according to estimates by the National Bank of Ukraine (NBU), the negative effect on GDP and on the balance of payments will be negligible. This was stated by the head of the NBU Valery Gontareva today, March 2, at a press briefing on monetary policy.

This Gontareva noted that the long-term continuation of the current situation with the blockade of railway lines in the Donbass will lead to the final break of production chains and the delivery of finished products.

Consequences of the continuation of the blockade of Donbass, the head of the NBU is called the reduction of metal production, coke, electricity, etc.

“According to our estimates, the most pessimistic scenario, the continuation of the blockade until the end of the year may slow economic growth by 1.3 percentage points, i.e. to 1.5% in the current year“, – said Gontareva.

She noted that the situation in the Donbass can increase the risk of inflation indirectly, namely via the negative impact on the balance of payments and exchange rates in Ukraine.

Note that the forecasts of the regulator the level of inflation remained unchanged: this year, the national Bank announces the inflation rate is 8%, with possible deviations of +/- 2%. Gontareva stressed that in 2017 the first three quarters will remain high growth of inflation, but at the end of the year the NBU predicts inflation to the level of 9.1%.

Also, the NBU reported that the state of the current account of the balance of payments of Ukraine can be affected by the reduction in exports of metallurgical products and the increase in imports of thermal coal.

“According to our estimates, the balances of the current account balance may worsen by approximately 2 billion US dollars. Accordingly, it may adversely affect the dynamics of the interbank currency market”, – said Gontareva.

However, the risk of losing $ 2 billion of foreign exchange earnings due to the ongoing transport blockade of Donbass can disrupt the plans of the NBU to increase international reserve of Ukraine.

At the same time, the NBU head stressed that the baseline scenario of continued cooperation with the International monetary Fund (IMF), in particular, receipt of tranches from the Fund will allow us to offset the impact of the risks caused by blockade of Donbass, the price and currency situation in Ukraine.

At the end of February the international reserves of Ukraine amounted to 15.5 billion us dollars compared with 15,445 billion at the beginning of February.

As reported, Gontareva did not rule out the possibility that she will leave the post of the NBU Governor after the signing of memorandums IMF. The head of the NBU also reported that the national Bank is ready for signing of the Memorandum.

As you know, the signing of the Memorandum of economic and financial policy programme of the eff the EFF will enable the Fund to consider the allocation of Ukraine of the 4th tranche of the loan in the amount of 1 billion U.S. dollars.

In addition, today, March 2, it became known that the unfavorable inflationary factors, the NBU kept the discount rate at 14%.