May 6, 2020 / 3:07 PM / 19 days ago

Ukraine faces deepening recession due to coronavirus lockdown - Reuters poll

KIEV (Reuters) - Lockdown measures to battle the coronavirus pandemic will cause Ukraine’s economy to shrink by 1% in the first quarter of this year and contract 10.9% in the second quarter, a Reuters monthly poll of analysts said on Wednesday.

FILE PHOTO: A Ukrainian state flag, which is installed on the roof of the parliament building, flies in Kiev, Ukraine September 25, 2019. REUTERS/Valentyn Ogirenko

The government has forecast that the country’s gross domestic product will shrink by about 5% overall in 2020 and the State Statistics Service will publish GDP data for the first quarter in mid-May.

If the Reuters poll forecast is confirmed, this would mark the first quarterly decline in economic growth for Ukraine since 2015. Last year, the first two quarters had growth of 2.9% and 4.7% respectively.

In the wake of Russia’s annexation of Crimea and a military conflict with Russia-backed separatists in industrial eastern Ukraine, GDP fell 16.0% in the first quarter and 14.0% in the second quarter of 2015.

With recession looming again, the government is trying to secure an $8 billion package from the International Monetary Fund, conditional on reforms.

Artem Shcherbyna from investment company Capital Times said: “Due to the implementation of quarantine measures throughout Ukraine in April-May 2020, we are recording a partial or full halt to the activity of most sectors of the national economy.”

The government has extended to May 22 a nationwide lockdown that was initially imposed in mid-March.

It bans or limits many business activities except critically important services such as food production and pharmacies.

“A deep drop is seen in the passenger transport sector (due to the quarantine), in industries (due to a fall in external demand, primarily due to the quarantine in the EU),” wrote Hanna Cherednychenko from the think tank International Centre for Policy Studies.

She also said wholesale and retail trades suffered due to low demand from households, with people staying at home and curbing their spending as incomes were hit.

The poll, conducted with analysts from 11 Ukrainian banks and investment companies, also pointed to the country’s economy starting to recover in the second half of the year.

But the analysts said it was difficult to predict when exactly the recovery would start or how strong it would be until a date for lifting the lockdown fully was fixed.

The government has promised to lift some restrictions from Monday, depending to what extent the virus has been contained. This could include reopening parks as well as some shops, such as those specialising in household goods.

The country has reported 13,184 coronavirus cases and 327 deaths as of May 6.

Editing by Matthias Williams and Jane Merriman

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