KYIV

Ukraine expects its economy to expand further and grow by 3.4 percent this year, supported by the growth in the industry due to favourable conditions on foreign commodity markets.

The country’s partners pledged over $4 billion in financial aid in a move to support Ukraine’s economy amid anticipation of a military conflict with Russia. Funds include loans and grants from the U.S., Canada, Japan, France, Sweden and other countries. Last month, the EU proposed a 1.2 billion euro financial aid package to Kyiv to mitigate the effects of the conflict with Moscow.

Tensions between Russia and Ukraine have been escalating with Moscow amassing more than 100,000 troops on the Ukrainian border. Western countries say they fear Russia may be planning to invade, although Kremlin denies such plans.

Ukraine’s gross domestic product (GDP) grew by 3.2 percent in 2021, backed by the growth in the industry. The economy started to grow from the second quarter, reversing five consecutive quarters of negative growth linked to the imposition of restrictions owing to COVID-19. In nominal terms, GDP was a record-high $200 billion.

“The economy will be supported by consumer demand and trade conditions that will still be favourable,” Kyrylo Shevchenko, the central bank head, said.

He added that the potential of the economy would be limited by a “tense geopolitical situation that would affect investment decisions, significant consequences of the pandemic, relatively high energy prices, and shortages of certain raw materials, especially in the first half of the year.”

According to the central bank’s latest forecast, the real annual GDP growth will accelerate to about 4 percent in 2023-2024.

Authorities also expect a slowdown in annual inflation.

“We will stabilise the situation and reach the (inflation) target indicator in 5 percent by the end of next year,” Yulia Sviridenko, first vice prime minister and economy minister, said.

Annual inflation amounted to 10 percent in 2021.

According to the World Bank’s latest projection, Ukraine’s economy is expected to expand by 3.2 percent in 2022 and 3.5 percent in 2023.

The International Monetary Fund (IMF) projects Ukraine’s growth this year at 3.6 percent. In October last year, Ukraine and the IMF reached a preliminary “staff-level” agreement after months of tortuous negotiations on resuming disbursements of a standby arrangement and a new disbursement of about $700 million has been approved.