Ukraine’s GDP due to the pandemic COVID-19 will decline by 7% in 2020 due to the impact on the economy of external and internal shocks.
This forecast of the German economic team (GET) in cooperation with the Institute for economic research and policy consulting (IEI, Kiev), “the Economic impact of a pandemic COVID-19 in Ukraine”, which was published on the online presentation at UKRINFORM.
“Ukraine’s economy will suffer because of the pandemic, COVID-19. GDP will shrink by 7% in 2020, the impact on the economy of external and internal shocks. Before the pandemic, the expected GDP growth of 3%. According to the pessimistic scenario, which envisages a long quarantine measures in Ukraine, and stronger external shocks, the economy will decrease even by 11.2%,” – said in the study.
As David pointed out Zaha, consultant of the German economic team and lead author of the study, the main reason for this dramatic decrease is a combination of internal and external shocks due to strict quarantine measures.
“The longer the quarantine, which closed businesses, the slower will be the recovery in subsequent years”, – the expert believes.
The authors of the study modeled three scenarios of the impact of coronaries Ukraine: optimistic, basic and pessimistic. The scenarios are based on the analysis of internal and external shocks from the stop sectors of the economy, reducing demand on main export products of Ukraine and the reduction of remittances from abroad.
“Our base forecast reduction in GDP by 7% in 2020 is pessimistic pole range of current forecasts for Ukraine, but in General is the General trend with other forecasts of the government and international organizations”, – said Vitaliy Kravchuk, a senior researcher at IEI.
The authors of the study record a significant decline in economic activity in the areas of retail trade, restaurant and transport.
“Among the sectors that provides the economy with goods or services, from the negative effects of the pandemic most affected the transport sector. Due to the closure of domestic and international passenger traffic and volumes of trade in goods in the transport sector is expected to decline provision of services by 14.3% compared with the 2019 year,” the study says.
David Zaha believes one of the main shocks to the economy of Ukraine, the fall in remittances from abroad as an important factor in the welfare of Ukrainians.
“Remittances from abroad are an important part of people’s incomes, and in Ukraine the share of these transfers is 8% of GDP. This income from abroad is affected, because in other countries is also declining activity in the services sector, where many people from Ukraine. In our study, we focused on data from the world Bank and came to the conclusion that the decrease in remittances from abroad this year will be approximately 28%,” – said the expert.
According to Robert Kirchner, head of German economic group in Ukraine (GET), attaching in previous years a lot of efforts to stabilize the macroeconomic situation, Ukraine now has a good basis to overcome the crisis.
“Since Ukraine’s economy was in good shape when they started the pandemic, its impact will not be as strong as the impact of the crisis in 2009, which led to a reduction in GDP by 15%. Also the government has a space in its policy to support the economy,” said Kirchner.
He believes it is important to overcome the economic crisis recently adopted in Ukraine, the laws on the banking sector and the land market, as well as a new IMF program, which will help stabilize government spending.
“In order to Finance the expenses that appear as a result of the crisis, it is important to continue cooperation with the International monetary Fund will allow Ukraine to Finance its own budget, as well as improve its access to financial markets,” – said the expert.
German economic team (The German Economic Team – GET) advises the governments of Ukraine, Belarus, Moldova, Georgia and Uzbekistan on the development of the processes of economic policy reforms and sustainable economic development.
Institute for economic research and policy consulting (IEI) is the leading Ukrainian analytical center, which specializiruetsya on economic analysis and developing recommendations.