KYIV

Ukraine downgraded its forecast for economic growth this year and next as economic activity, though starting to show signs of recovery from the COVID-19 pandemic that’s devastated global growth, continues to be hampered by ongoing public health restrictions.

The government cut its forecast for gross domestic product (GDP) growth to 4.1 percent from 4.6 percent in 2021 and to 3.8 percent from 4.3 percent in 2022.The economy shrank 2 percent year-on-year in the first quarter, although officials said that April was marked by some positive trends, in particular in terms of industrial production growth.

Government officials said in March that GDP growth could reach 5.1 percent this year, adding that sustained annual growth of 1-2 percent required additional investments in the economy of at least $3 billion. In 2020, Ukraine’s economy contracted by 4.2 percent.

In April, Ukraine’s central bank downgraded its forecast for real GDP growth in 2021 to 3.8 percent from 4.2 percent.

“The introduction of new quarantine restrictions has led to the suppression of business activity,” the bank said. “The effect of last year’s low harvests affected the indicators of agriculture, food processing and cargo turnover.”

The bank projected that after a 2.8 percent drop during January-February, the economy should return to growth in the second quarter of this year.

International economists have also predicted Ukraine’s recovery will gather pace. The World Bank raised its growth forecast for Ukraine this year to 3.8 percent. In April, the International Monetary Fund (IMF) raised its forecast for Ukraine’s growth this year to 4 percent from a previous projection of 3 percent issued last October. The new figure, published in the Fund’s World Economic Outlook, also forecasts 3.4 percent growth for 2022.

Ukraine is hoping to secure its next tranche of IMF credits in September.

While the IMF disbursed $2.1 billion after approving the loan programme last June, a Fund mission ended in February leaving the issue of new tranches unresolved. The IMF set out which issues stood in the way of endorsing further payments in the 18-month standby arrangement, involving about $5 billion: strengthening the governance of the central bank, improved legislation for bank supervision, policies to cut the medium-term fiscal deficit and legislation to restore and strengthen Ukraine’s efforts to tackle corruption.

Talks to determine whether these conditions have been met are still underway.

The central bank also expects foreign portfolio investors will bring in about $1 billion by buying government bonds in the domestic market this year.