Economic forecast 2006–2007

Forecast for 2006–2007

GDP should grow 5.5% annually over 2006–2007

The ICPS forecast for 2006–2007 is for the economy to grow 5.5% per annum. The acceleration in 2006 will be driven by renewed investment flows, which are expected to grow 7% according to the ICPS forecast on the back of increased commercial lending and public investment. In 2007, investment will accelerate to 9% per annum.

After a record-high growth throughout 2005, private consumption will slow down to 8% in 2006 and remain flat in 2007. The slowdown in household consumption will be because of slower growth in personal incomes.

As in 2005, imports will grow faster than exports throughout the forecast period. The value of trade in goods will climb 6% in 2006 and 7% in 2007, whereas imports will grow 11% per annum. The balance of trade will become negative in 2006; while the current account balance will grow negative in 2007.

According to the ICPS forecast, consumer prices will grow as fast in 2006 as they did in 2005, 11.5% per annum. In 2007, prices should slow down to 7%, as personal income growth slows. Producer prices will also grow more slowly. Provided there are no unpredictable fluctuations on external markets, the Producer Price Index will grow 6% in 2006 and 7% in 2007.

The share of GDP re-distributed through the Consolidated Budget will fall back to 29% over 2006–2007. As social benefits grow more slowly, Consolidated Budget expenditures will remain flat in 2006, at 32% of GDP, and then shrink to 31% of GDP in 2007. ICPS economists do not expect a significant decline in tax rates throughout the forecast period.

According to the ICPS forecast, interest rates for hryvnia loans will gradually fall closer to interest rates for hard currency loans. The average rate for hryvnia loans will shrink to 9% by late 2007. 

Updated

January 9, 2006

Contents

	Overview
	Current situation
	Forecast for 2006–2007
	Forecast risks
	Highlights of the latest Quarterly Predictions

Contact person

Yevhenia Akhtyrko
Chief Economist
e-mail:
phone: (380-44) 484-4403