13:32 13.05.2017

S&P forecasts Ukrainian GDP growth in 2017 by 1.9% and in 2018 by 2.8%

2 min read
S&P forecasts Ukrainian GDP growth in 2017 by 1.9% and in 2018 by 2.8%

S&P Global Ratings forecasts Ukraine's real GDP may grow by 1.9% in 2017 and further to 2.8% in 2018.

"We forecast growth of 1.9% in 2017, despite challenging conditions in light of the recent blockade in the east of the country. We expect consumption will strengthen over the forecast horizon on the back of higher minimum wages, decelerating inflation, and gradual labor market improvements," S&P said in its overview.

S&P notes that further economic recovery should be propped up by reforms conducted by the authorities to invite more investment to such key sectors as agriculture and construction, as well as by the agreement on a free trade area with the European Union.

"We expect continuing growth as reforms boost investment in key sectors such as agriculture and construction, likely leading to GDP growth averaging 2.7% per year in 2017-2020. In addition, the Deep Comprehensive Free Trade Agreement with the EU, which came into force in 2016 and has partly compensated for the declining exports to Russia, could support export growth in the medium term," S&P experts forecast.

The rating agency also projects the country's current account deficit at 3.3% of GDP per year on the average 2017 through 2020.

"As the economy continues its recovery and exports pick up, we forecast the current account deficit will average 3.3% of GDP in 2017-2020, financed by a mix of foreign direct investment, donor funds, and foreign borrowings," they added.

S&P also forecasts external debt net of liquid assets to average 131% of current account receipts in 2017-2020, while gross external financing needs as a percentage of current account receipts and usable reserves, its key external liquidity measure, will also stand at 137%.

Yet, S&P projects that both ratios will likely start declining, however, because the growth of current account receipts will remain supported by sound export performance.

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