Ukrainian economy seen rebounding sharply in second quarter as virus restrictions ease: Reuters poll

KYIV (Reuters) - The Ukrainian economy will rebound sharply to 10% growth in the second quarter of 2021 after five successive quarters of decline, provided the government sticks to easing coronavirus lockdown restrictions, a Reuters poll showed on Friday.

FILE PHOTO: People wearing protective face masks visit the Central Universal Department Store (TsUM), on the first day after ending a coronavirus lockdown, in Kyiv, Ukraine January 25, 2021. REUTERS/Valentyn Ogirenko

Prime Minister Denys Shmygal said this week that the government could end a nationwide lockdown soon and allow health authorities to ease restrictions in regions with fewer coronavirus cases.

According to the median forecast of Ukrainian analysts polled by Reuters, gross domestic product will shrink by 0.5% year-on-year in January-March but then grow 10.2% in the second quarter from a low base.

“From 2021, we expect a sharp recovery of the domestic economy, which will be primarily driven by external demand against the background of improving the pandemic situation,” analysts from the ICU brokerage said in written comments.

The sharp rebound in the second quarter is rooted partly in the low base from 2020, when the economy shrank 11.4% in April-June as coronavirus restrictions were especially tight.

Higher seasonal activity in the farming and construction sectors in the second quarter is also likely to boost the economic rebound, analysts said.

But Nataliya Khimich from the First Ukrainian Investment Bank said that “reduced consumption and weak investment activity” due to ongoing lockdown restrictions would prevent a rebound in the first three months.

The government imposed a sharp three-week lockdown in January and still has various restrictions in place on transport and businesses such as restaurants, theatres and sports clubs.

The central bank expects the economy to grow 4.2% this year compared with a drop last year of 4.4%.

The median forecast of 12 analysts sees 4% growth in 2021.

The central bank in January kept its main interest rate unchanged at 6% to boost the economy despite rising inflation. [L1N2JW10J]

The analysts see inflation climbing to 6.7% by the end of 2021 from 5% in 2020.

Editing by Matthias Williams and Steve Orlofsky