In the event of hostilities in 2023, the Ukrainian economy will grow by 2% with inflation of 19.4%, however, due to continued blocking of ports and net capital outflow, international reserves will decrease to $9.8 billion, or 1.5 months of imports, such an alternative scenario of the macroeconomic forecast in the inflation report was published on the website of the National Bank of Ukraine (NBU).

"In terms of the main macroeconomic parameters, the alternative scenario does not differ much from the baseline ... At the same time, the risks of macro-financial destabilization in this scenario increase significantly, which makes tough economic measures by the authorities and significant international support even more critical," the NBU said.

In the baseline scenario, the National Bank predicts next year GDP growth of 5.5% with inflation of 20.7% and an increase in reserves from $20.8 billion to $21.2 billion.

The central bank explains the proximity of major macroeconomic indicators, first of all, by the fact that the alternative scenario provides for the same volumes of foreign assistance, the existence of a program with the IMF, a more significant use of accumulated buffers in the form of international reserves, and an adequate response of economic policy measures.

At the same time, according to the document, in addition to direct socio-economic losses, a longer period of hostilities will significantly worsen the consumer sentiment of the population, negatively affect the intentions of citizens who have left to return from abroad, which will constrain consumer activity next year. Investment activity during this period will also be suppressed and will consist primarily in the restoration of the most critical infrastructure for both public needs and private business activities.

"Fiscal policy will remain forcedly soft. The need for further monetization of the budget deficit will increase. Budget resources will be directed primarily to defense needs and support of the population during the war... This will lead to a significant increase in public debt and will require a tighter fiscal policy in the future," the NBU said.

The National Bank said that to compensate for the pro-inflationary factors associated with the continuation of the war, the NBU's monetary policy in this scenario will be tougher than in the baseline one.

"Containing pressure on international reserves will require a more significant increase in the key policy rate than in the baseline scenario. However, foreign exchange interventions will remain the main tool of monetary policy in 2023," the NBU said in the Inflation Report.

According to the regulator, the hryvnia devalues more in this scenario, but the predicted level of devaluation is absent in both scenarios.