IMF explains pessimistic forecast for Ukraine's GDP in 2020 by lack of household savings, limited fiscal support
The forecast of an 8.2% drop in Ukraine's gross domestic product (GDP) in 2020 is due to a weak stock of savings of Ukrainian households and limited fiscal support to the economy, IMF Resident Representative in Ukraine Goesta Ljungman has said.
There are two factors why Ukrainian GDP is falling more than in other countries: the first is that Ukrainian households do not have such ... cash buffers as in other countries, he said during the online conference of the European Business Association (EBA) "Business Outlook: Crisis Management Lessons."
He explained that consumption has fallen very much and will continue to fall even more if there is no cash reserve.
The IMF representative added that another factor is the limited fiscal support of the economy due to the fiscal and tax fields.
He specified that, in comparison with other countries, Ukraine is somewhere in the middle in terms of the level of support provided to the economy amid this crisis, which at the same time is limited by fiscal space and financial instability.
The official also noted that it is very difficult to predict further development until the vaccine against COVID-19 is invented.
As reported, the IMF in early June downgraded the forecast for a decline in Ukraine's GDP in 2020 to 8.2% from 7.7% in its World Economic Outlook for April. The fund also lowered its forecast for the recovery of the Ukrainian economy in 2021 from 3.6% to 1.1%, accelerating to 3% in 2022.
IMF expectations are significantly worse than those of the government and the National Bank of Ukraine (4.8-5% fall this year) and other organizations, in particular the World Bank, which forecasts a decline of only 3.5% this year.