The NBU said the blockade ORDO will affect the hryvnia exchange rate and GDP growth. Infographics
Economic growth in 2017 can be lower than in the January forecast of 1.3% due to the trade blockade of the occupied Donbass.
This warned the NBU during an extraordinary meeting of the monetary policy Committee.
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The financial regulator expects that the largest effect of the trade embargo, the Ukrainian economy will feel this year because of the seizure by terrorists of enterprises operating in the Ukrainian legal framework, the breaking of chains of production and supply of finished products will decrease the volume of production of metallurgical and mining industry, coke, electricity.
Thus, the national Bank revised the previous forecast for economic growth in 2017 from 2.8% to 1.9%. At the same time, the forecasts of the regulator, blockade of trade with ORDO will not have a significant impact on the level of consumer inflation in 2017-2018, so significant changes in forecasts of inflation (9.1% in 2017 and 6.0% in 2018) in NBU do not.
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The impact of the embargo on the exchange rate of the hryvnia will be limited. The deterioration in the balance of payments primarily appears on the net purchase of currency in the market to replenish the reserves.
According to the NBU, due to the development of the situation in the East of the country reduced the export of metallurgical products and increase the import of coal. As a result, the deficit in the current account balance could deteriorate by about 1.8 billion dollars. USA.
“These losses will be largely offset by a favorable situation on foreign commodity markets, the positive effect of which on the state of the current account to approximately $ 1 billion. USA. Consequently, the forecast current account deficit in 2017 pre-revised up to 4.3 billion dollars. USA (the January forecast of $ 3.4 billion. USA). In 2018 the current account deficit is expected at the same level”, – noted in the financial regulator.
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To mitigate the impact of the trade embargo on the foreign exchange market , the national Bank plans to reduce the volume of purchases of foreign currency in the interbank market, leaving more currency in the market and contributing to the narrowing of the hryvnia exchange rate fluctuations. National Bank plans to reduce the forecast volume of international reserves to 20.8 billion dollars. Million at the end of 2017 (the January forecast of 21.3 billion U.S. dollars), and to 27.1 billion dollars. USA at the end of 2018 (the January forecast of $ 3.4 billion. USA).
