KYIV, Aug 4 - The growth of real gross domestic product (GDP) of Ukraine in the second quarter of 2023 compared to the same period last year amounted to 18.3% after a decline of 10.5% in the first quarter, the National Bank of Ukraine published such an updated estimate in the inflation report on its website.

According to it, in the third quarter of 2023, the economic recovery will slow down to 4.6%, and in the fourth - to 1.8%, with a slight acceleration to 2.6-2.2% in the first and second quarters of next year.

At the end of April, the National Bank expected GDP growth by 15.9% in the second quarter of this year, and by 3.9% and 3.7%, respectively, in the third and fourth quarters.

In general, as reported, the NBU improved the forecast for Ukraine's economic recovery this year to 2.9% from 2% in April (including by improving the estimate of the decline in the first quarter from 13.5% to 10.5%), but worsened it for next year to 3.5% from 4.3%.

"The baseline scenario is based on the assumptions that Ukraine will consistently comply with the obligations of the Extended Fund Facility with the IMF, pursue coordinated monetary and fiscal policies, and gradually level out quasi-fiscal imbalances, in particular in the energy sector. The baseline scenario also assumes a tangible reduction in security risks from mid-2024, which will contribute to the full unblocking of seaports, the reduction of the sovereign risk premium and the return of forced migrants to Ukraine,” the report says.

Despite this, the longer duration and intensity of the war remains a key risk for the forecast, which could slow down economic recovery and worsen inflation and exchange rate expectations, the National Bank emphasizes.

Among other risks, the regulator named a decrease in the volume or loss of rhythm of international assistance, the resumption of a significant shortage of electricity due to further destruction of the energy infrastructure, which will limit economic activity and exports and lead to an increase in imports and demand for foreign currency.

The NBU also pointed to the risks of limiting export logistics due to large-scale terrorist attacks, the emergence of additional budgetary needs and significant quasi-fiscal deficits, in particular in the energy sector, further complications for the export of agricultural products. (om/ez)