The Cabinet has lowered its forecasts for GDP growth and inflation

The Cabinet of Ministers of Ukraine worsened the macroeconomic forecast for 2017, in particular, lowering the estimate of GDP growth from 3% to 1.8% and increasing the rating of inflation (December to December) from 8.1% to 11.2%. The corresponding resolution of the correction approved at the beginning of June last year, the macro forecast was approved at the Cabinet meeting on Wednesday, may 31.

Among the reasons for the revision of the assessment of the dynamics of the economy is called the ending at the beginning of this year, transport with uncontrolled territories in Donbas, as well as higher-than-expected base of comparison, 2016. Among the factors of increase of inflation is the increase in the minimum wage.

The explanatory Memorandum States that the revised forecast is close to the forecast of the International monetary Fund (IMF) – GDP growth of 2% when inflation is 10% and the consensus forecast of the leading Ukrainian analytical centers, with GDP growth of 1.9% with an inflation rate of 10.5%.

According to the draft regulations, assessment of nominal GDP in 2017 is expected to increase from 2,585 trillion UAH to 2,846 trillion UAH, the growth of prices in industry – from 8.5% to 16.8%, the profit of profitable enterprises – with 616,4 billion to 639 billion.

The project expected the payroll of 2017 upgraded from 666,9 billion to 796,3 billion UAH, and average monthly salary (gross) – with 5988 UAH to UAH 7104 with the reduction in the number of employees from 16.7 million to 16.25 million and the increase in unemployment from 8.7% to 9.3%.

Evaluation of foreign trade deficit in the updated forecast deteriorated from 2.68 billion U.S. dollars to 6.49 billion U.S. dollars.

It is expected that exports will increase by 10.4% to 50,74 billion dollars, and import – by 10.6%, to 57,22 billion, while approved last summer, the forecast assumes the increase of export by 8% to 47.23 billion, while imports increase by 9.7% to 49.9 billion.

While the basic macroscenarioapproved by the Cabinet, suggests an acceleration of GDP growth to 3% in 2018, and 3.6% in 2019 and 4% in 2020.

“In (basic Ed.) the moderate scenario is considered the rate adaptation of business to new conditions, saving significant challenges and risks in the economy”, – commented on the macroeconomic forecast, Stepan Kubiv.

He said that more optimistic scenario the adaptation of the business implies GDP growth of 4% in 2018-2019, and it accelerated to 5% in 2020.

At the pessimistic scenario of unstable world economy GDP growth in 2018 will slow to 1.2% in 2019, – up to 1%, and in 2020 will be 1.7%, said Kubiv.

The approved scenario also assumes a slowing of inflation (December to December) from 11.2% this year to 7% in 2018, and then to 5.9% in 2019 and 5% in 2020.

Note that Mejdunarodnyi monetary Fund (IMF) forecasts inflation in Ukraine at a level of 10% by the end of 2017. This forecast was made head of the IMF mission Ron van Roden in the statement on results of work in Kiev.

As reported, the Ministry of economic development and trade (MEDT) of Ukraine predicts GDP growth in Ukraine by the end of 2017 at the level of 1.8%. The European Bank for reconstruction and development (EBRD), the largest international financial investor in Ukraine, as IMF predicts economic growth of the country in 2017 2%.

Ukraine’s GDP as a whole for the year 2016 compared to 2015 increased 2.3%, while growth was recorded for the first time in 4 years, after the economy of Ukraine demonstrated decline by 9.8% in 2015 and 6.6 percent in 2014, and in 2013, GDP growth was zero.