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The NBU maintains the discount rate and worsens the GDP forecast

Photo: General Staff of the Armed Forces of Ukraine / Facebook

The main assumption of the deteriorating outlook is a significant reduction in security risks from the beginning of 2024, the regulator noted.

The National Bank of Ukraine again kept the discount rate at 25% per annum and worsened its forecast for GDP growth. This was reported on the regulator’s website on Thursday, January 26.

“In order to return inflation to a trajectory of steady decline, as well as support the exchange rate and macro-financial stability in the face of high levels of uncertainty, the Board of the National Bank decided to leave the discount rate at 25 % ,” the statement said.

The NBU has kept the rate at this level since June 2, 2022. Then the regulator decided to raise the discount rate from 10% immediately to 25%.

The discount rate is equal to the economic value of money. At this rate, the NBU provides funds to commercial banks, which, in turn, lend to individuals and legal entities. Thus, the discount rate affects the value of credit resources. An increase in the discount rate indicates an increase in the level of inflation and a decrease in the rate of economic growth in the country.

In addition, the National Bank sharply worsened the forecast for the growth of the country’s gross domestic product in 2023 – to 0.3% from 4% in the previous forecast, which is mainly due to the extension of the baseline scenario with full- scale war. for another six months – until the beginning of 2024.

“The main assumption of the forecast is a significant reduction in security risks from the beginning of 2024. The main risks remain a longer period of full-scale military aggression by Russia, as well as further destruction of critical that infrastructure,” said the NBU.

For 2024, the forecast for GDP growth has also worsened from 5.2% to 4.1%, but economic growth is expected to accelerate to 6.4% in 2025.

For 2022, the NBU estimates a 30.3% decline in GDP following its results, including 35% in the fourth quarter.

According to his estimates, nominal GDP last year reached UAH 4.825 trillion, which is better than the previous forecast of UAH 4.75 trillion. However, for this year the forecast of nominal GDP worsened to UAH 5.985 trillion from UAH 6.175 trillion, and for next year to UAH 7.085 trillion from UAH 7.35 trillion.

Earlier, the Ministry of Economy said that last year the GDP of Ukraine sank by almost a third. This is the biggest drop in history, but better than expected.

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Source: korrespondent

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