Real GDP growth in Ukraine may reach 3% to 3.5% in 2012, compared to 5.2% in 2011, and inflation could speed up to 6.5% - 9.5^, experts polled by Interfax said.

Real GDP growth will be 3%, said Anastasia Golovach, an analyst with Renaissance Capital.

She attributes the drop compared to last year to lower crude prices, a corresponding reduction in value added growth in industry and slower growth in domestic demand.

Capital investment could remain a strong internal driving force for economic growth, she said.

The downward trend in global demand for metals observed at the end of 2011 will probably remain for most of 2012, so the real rate of GDP growth will drop to around 3%, said Irina Pointkovskaya of Troika Dialog Ukraine.

Current data from the markets and forecasts for the leading world economies indicate that crude prices will not fall at least in the next six months, said Alexander Valchishen of Investment Capital Ukraine.

He forecasts a more optimistic 3.5% GDP growth in 2012.

Inflation will speed up to 7.9% from 4.6% in 2011, Golovach predicts.

Although low food inflation is expected, the need to raise gas tariffs will probably lead to a rise in prices at the end of the year, she said.

Consumer inflation in 2012 will be determined on the one hand by a slower rate of domestic consumption growth amid slower economic growth, which will help to contain price hikes, and on the other, by the anticipated drop in harvest due to poor weather conditions, which will push food prices up, said Elena Belan of Dragon Capital. As the consequences of a reduced harvest will be felt in the second half of the year, inflation will probably remain low until June and then speed up in the second half.

Belan predicts inflation of 9.5% if the authorities agree to raise gas prices in accordance with International Monetary Fund demands and 7.5% if tariffs are stable.

With a 15%-20% increase in gas tariffs for the population, inflation could rise to 9.1% in 2012, says Svetlana Rekrut of Concord Capital. This will encourage the anticipated rise in food prices in the second half because a positive harvest in 2012 is unlikely, she said. An increase in salaries and benefits ahead of parliamentary elections in October could also encourage consumption and consequently price rises, she added.

Considering the lack of a new gas agreement with Russia and the difficulties of raising funds on foreign markets, it would be logical to expect a correction in energy tariffs, which will speed inflation in 2012 up to around 6.5%, Pointkovskaya said.

GDP expanded 5.2% in 2011, compared to 4.2% in 2010. The government forecast real GDP growth of 3.9% in the 2012 budget but hopes to keep it at 5%-6%.

The World Bank and the European Bank for Reconstruction and Development forecast GDP growth of 2.5% in 2012.

Inflation in 2011 slowed to 4.6% from 9.1% the previous year and was at a record low since independence in 1991: the best result prior to 2011 was 6.1% in 2001. Also Ukraine saw 0.6% deflation in 2002.

The government expects inflation to climb to 7.9% and the 2012 budget is based on this forecast.

The World Bank predicts Ukrainian inflation in 2012 at 9.4%.


 

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