KYIV, May 12 – An economic impact from the coronavirus pandemic on Ukraine will be worse than has been originally expected due to collapsing worldwide demand for steel and other commodities, J.P Morgan said in a report.

Ukraine’s economy will probably shrink 5.1% on the year in 2020 due to the coronavirus pandemic but will rebound by 6.3% on the year in 2021, J.P. Morgan said.

A similar report taken at the end of March predicted economic contraction at 2.6% in 2020 and a rebound of 5.1% in 2021.

“The shock of coronavirus (COVID-19) decease hit both exports and imports of goods,” J.P. Morgan said.

Ukraine’s steel sector, the backbone of the country’s economy, was hit hard by collapsing demand worldwide, with analysts now expecting steel exports may plummet 55% on the year in 2020, which is comparable to the decline caused by the financial crisis in 2009.

Ukraine’s agriculture exports will only somewhat will be affected and will have a limited decline due to smaller harvest, while exports of other goods and commodities are expected to drop 40% on the year in 2020.

Consumer inflation is expected at 3.7% in 2020 before accelerating to 6% in 2021, J.P Morgan said.

The hryvnia exchange rate can weaken to UAH 29.5/$1 by the end of the second quarter of 2020, then strengthen to UAH 29/$1 at the end of the third and fourth quarters and return to UAH 29.5/$1 by the end of the first quarter of 2021, according to the report.

The figures show a much worse impact of the virus on the value of the hryvnia. In March, J.P. Morgan expected the exchange rate to reach UAH 28.5/$1 at the end of 2020, and UAH 29.5/$1 at the end of 2021.

Ukraine’s imports may decline 35% on the year in 2020, which is better than 52% drop registered in 2009, analysts said.

J.P. Morgan is optimistic on Ukraine shortly approving an important banking bill that may open way for lending from the International Monetary Fund, and expects Ukraine will be able to receive the first tranche of $1.75 billion at the end of May or, possibly, in June. (tl/ez)