According to the updated forecast of the International Monetary Fund, the economic situation in Ukraine during the current and next year may worsen due to the war that Russia started and is conducting.
Points of attention
- The IMF lowered the GDP growth forecast for Ukraine for 2024.
- The IMF's negative scenario predicts the start of a shock in the third quarter of 2024, which could lead to a contraction of the economy by 1.7%.
- The risks associated with the duration and intensity of the war complicate forecasts regarding the economic development of Ukraine.
- It is possible to introduce additional taxes and non-traditional measures in case of deterioration of the economic situation in the country.
What will happen to GDP and inflation in Ukraine?
As a result of the fourth revision of the expanded financing program of the EFF of Ukraine, the base scenario for 2024 was also revised.
It is worth noting that the IMF previously predicted GDP growth to be 3-4%, but it has now reduced it to 2.5-3.5%.
As for inflation, it used to be about 8.5%, and now it is about 8%.
What's more, the Foundation's team is said to be considering a pessimistic scenario, which maintains the assumption of a more intense war lasting until the end of 2025.
Why the development of the economic situation in Ukraine is complex to predict
As the IMF explains, it is almost impossible to predict all the risks associated with war, both in terms of duration and intensity.
It is essential to understand that war may require additional costs for conducting military operations in the primary mode, particularly at the expense of planned mobilisation.
According to the experts, if the seriousness of the upheavals takes Ukraine beyond the pessimistic scenario, the authorities will likely start resorting to unconventional measures.
First, it may be an additional tax to the personal income tax and/or a tax on luxury goods or excise duties.
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