The National Bank downgraded its economic forecast, explained the rise in inflation, and predicted the risks of a global trade war

Governor of the National Bank of Ukraine, Andriy Pyshnyi, announced a downgrade of the central bank’s GDP growth forecast for the current year to 3.1%, down from the previously projected 3.6%.

According to Pyshnyi, the increase in inflation to 14.6% year-on-year in March was driven by: last year’s poor harvest, continued price hikes on excise goods, rising business costs for energy and labor.

However, he expects inflation to slow down, partly due to a drop in oil prices resulting from global trade conflicts.

Military risk remains the key threat to Ukraine’s economy, Pyshnyi emphasized.

He outlined the main economic risks as follows:

• Additional budgetary needs, especially to maintain defense capabilities;

• Further damage to infrastructure, particularly in the energy sector, which would limit economic activity and drive up production costs;

• Worsening migration trends and a growing labor shortage, which will increasingly restrict the economy’s long-term potential.

Pyshnyi also warned that the global trade war could negatively impact Ukraine’s access to external financing.

“These risks are being exacerbated by rising geopolitical uncertainty and accelerating deglobalization, including due to the sharp escalation of global trade tensions. If these trends persist, intensify, and are accompanied by increasing political polarization, the external environment may turn out to be less favorable than assumed in the current macro forecast. This could lead to a deeper and more prolonged weakening of the global economy and external demand, as well as disruptions in the pace of international financial support,” Pyshnyi concluded.