KYIV (Reuters) -Ukraine’s central bank kept its main interest rate unchanged at 25% on Thursday, and said Russian missile strikes on energy facilities were set to hit GDP this year and complicate a quick rebound by the economy.
The central bank increased the main rate to 25% in June to tame double-digit inflation as Russia’s invasion battered the economy. The bank’s officials have since repeatedly said they aim to keep it at that level until 2024.
Continued international financing is a key prerequisite for economic stability, the bank said in a statement after its last monetary policy meeting of the year. International financial aid will reach $31 billion this year, it said.
“The main risks for economic development are a longer period of full-scale military aggression by Russia, as well as a further increase in terrorist attacks against critical infrastructure facilities,” the statement said.
Russia, which invaded Ukraine in February, has increased attacks on energy facilities in recent weeks, with most of the country experiencing severe energy shortages and long blackouts.
“The fall in GDP will be deeper this year than we had expected in October,” deputy governor Serhiy Nikolaychuk told a news briefing. “Next year the economic recovery will be very lethargic and much lower than we had expected.”
The central bank said that consumer inflation had accelerated to 26.6% in October year-on-year.
The central bank’s current forecast sees Ukraine’s GDP falling by 31.5% this year. The bank expects the economy to return to growth in 2023, with GDP rising by 4%.
The International Monetary Fund expects Ukraine’s GDP to fall by 35% this year and that the economy will stabilize next year.
The central bank also said it was increasing obligatory reserve requirements for commercial banks by five percentage points.
Source: Economy - investing.com
