Business Update: April 14 – IMF says Ukraine’s economy will shrink, bounce back in 2021

Ukraine’s GDP may shrink by 7.7% in 2020, but bounce back with growth of 3.6% in 2021, the International Monetary Fund has stated. The prediction is part of the IMF’s World Economic Outlook, which was published on April 14 and forecasts a level of pain that could rival the Great Depression for many economies through 2020 – but also predicts a swift recovery if the right policy measures are adopted. According to the report, consumer prices in Ukraine will grow by 4.5% this year, and 7.2% next year. 

The IMF said: “As a result of the pandemic, the global economy is projected to contract sharply by –3 percent in 2020, much worse than during the 2008–09 financial crisis. In a baseline scenario, which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalizes, helped by policy support.”

European GDP as whole will take a hit this year before bouncing back in 2021, the IMF predicts. Europe’s GDP is expected to shrink by 6.6% this year, after 1.6% growth in 2019. However, in 2021, the European economy will return to growth and grow by 4.5% of GDP, the fund’s analysts forecasted.

At the time of writing on April 14, Ukraine has 3,372 cases COVID-19, 98 deaths and 118 recoveries. Experts have warned that there could be more cases than officially confirmed and that the government needs to ramp up testing and provide better protection to its frontline workers. 

Following amendments to the state budget in response to COVID-19, authorities in Ukraine immediately spent $55.2 million on medical supplies, the Ministry of Economic Development, Trade and Agriculture reported on April 14. 

In a one-day spending spree the Ministry reports that the following amounts were spent: $2.7 million on vehicles and ambulances, $2.5 million on protective clothing for police officers, $2.3 million for surgical gloves and protective masks, $7.3 million on respirator masks and other protective clothing, and $1.3 million was spent on ventilator machines. 

With most of its aircraft grounded because of COVID-19, UIA began to use its passenger aircraft for cargo instead, Liga.net reports. According to the company, its Boeing 737s can carry 20,000 kilograms of cargo, while a 767 can carry 29,000. On April 8, UIA completed the first cargo flight, bringing medical supplies from China to Ukraine for a commercial company. In late March, UIA announced the termination of regular flights until at least April 24 due to the introduction of emergency quarantine measures throughout Ukraine. The struggling airline has requested a stabilization loan from the state of $60 million due to daily losses while its aircraft are grounded.

State railway Ukrzaliznytsia bought 277,000 masks and 10,000 COVID-19 tests for its employees, it’s press service said. The company also plans to buy another 1.5 million masks, amid concerns that anti-COVID-19 protective measures are likely to be extended into the summer. Ukrzaliznytsia said on Monday, April 13, that employees are also provided with more than 22,000 liters of antiseptics, disposable gloves, goggles, disinfectants for premises and its rolling stock.

PrivatBank introduced credit holidays for mortgages and car loans. The state-owned bank said that clients who are experiencing financial difficulties because of  quarantine can postpone payments until July 31. The lender, as well as other banks, had already implemented some payment holidays on other types of lending, at the request of the National Bank of Ukraine. 

Most Ukrainians know little about the taxes they pay, new research indicates. A majority of Ukrainians don’t know how their taxes are being spent and very few actually realize how much the average person pays in taxes every year, according to a new study. Many respondents see taxation in a negative light. Almost 30% said that taxes are a mandatory fee that people pay to the state to be allowed to use the rest of their income. About 20% called taxes a robbery.

The British-Dutch oil company Shell has withdrawn from a joint project with Gazprom, DW reported. Shell said that the decision was due to the “negative impact of external factors.” Shell and Gazprom Neft signed an agreement to establish a joint venture at some Russian fields in June 2019. The Russian side said it will continue to develop assets on its own and plans to commission the Tazovskoye field by the end of the year.