KYIV, April 7 – Ukraine’s economy probably contracted in the first quarter, but the real impact of the January COVID-19 lockdown will be “insignificant,” Kyrylo Shevchenko, the governor of the National Bank of Ukraine, said Wednesday.

"Most likely there will be some decline in annual terms," Shevchenko told Interfax-Ukraine, adding that the impact from the COVID-19 lockdown will not exceed 0.2 percentage points.

"The impact is insignificant,” Shevchenko said. “It would seem that it should have influenced consumer confidence, because the previous lockdowns had a significant impact on the retail, restaurant and hotel business. But we saw an increase in retail turnover. And the impact of the lockdown on other industries, such as metallurgy, agriculture, is the smallest."

He said despite the lockdown and the comparison base formed before the COVID-19 pandemic, retail turnover in January added 3.5%, and in February its growth accelerated to 5.6%. According to him, most likely, the main factor of this growth (especially in January) was the increase in wages after the increase in the minimum wage.

The NBU head added that, according to the central bank's estimates, the March lockdown will also have a rather insignificant effect on GDP – less than in January.

"The final estimate will depend on the actual parameters of the quarantine. Of course, some support will be provided by the statistical effect of the comparison base: last year, from the second half of March, there was a very strict quarantine throughout the country," he said.

Shevchenko said that the external environment generally favored the Ukrainian economy at the beginning of the year, but Ukraine was unable to take full advantage of this due to weather, including limitations in ports and on highways.

"At the end of March, there was a black swan event – a traffic jam in the Suez Canal. But we can say that it almost did not affect Ukraine in terms of export and import of goods," the governor of the central bank said.

He said that the estimates of GDP dynamics are also affected by the difficult situation in animal husbandry, in particular due to the deterioration in the morbidity of animals and the rapid rise in the cost of feed, which negatively affected the reduction in the production of meat and dairy products.

"Due to a lower last year harvest and active oil exports against the backdrop of high global prices, stocks of oilseeds decreased, as a result of which the decline in the production of oil and fats deepened: in January-February it was 22% year-over-year. Lower harvest, as well as an increase in production costs led to a decline in the production of flour products – by 20.6% year-over-year and bread and bakery products – by 6.6% year-over-year," Shevchenko said.

At the same time, he said that the National Bank expects the balance of payments in the first quarter to be "absolutely normal." "Its balance remains positive. Here we are absolutely calm," the governor of the NBU said. (om/ez)