NBU Revises Economic Forecast Amid War, Port Blockades, and Rising Fuel Costs – Lepushynskyi

Forecasting the Economy in Times of Conflict

According to НБУ: Vladimir Lepushynskyi, Deputy Governor of the National Bank of Ukraine (NBU), highlights the crucial role of macroeconomic forecasting during wartime and periods of economic uncertainty in his article for LIGA.net. He notes significant adjustments in the NBU’s October economic outlook, driven by intensified Russian attacks on industrial facilities, warehouses, and logistics networks, the ongoing blockade of Ukraine’s seaports, and fuel price surges linked to conflicts in the Middle East.

Despite these challenges, the NBU continues its commitment to regular macroeconomic forecasting throughout the full-scale war. Lepushynskyi explains that the purpose of such forecasts is not to predict exact outcomes, but rather to provide a comprehensive understanding of how various shocks interact, the likely duration of their impacts, and the appropriate economic policy responses.

Economic Adaptation and Revised Projections

The updated macroeconomic forecast reflects the costs associated with the economy’s adjustment to new shocks, including:

• increased production expenses,
• higher consumer prices,
• losses in economic capacity.

Consumer demand is expected to weaken as a consequence of the war, which should help moderate inflationary pressures. The NBU plans to raise its key interest rate gradually to strike a balance between maintaining price stability and supporting economic growth.

In 2023, Nobel laureates Robert Hall and Michael Woodford explored the microeconomic foundations of macroeconomic stability, emphasizing that an economy’s performance depends heavily on current events and the expectations of individuals and businesses about the future. Their findings underscore why forecasting remains essential amid the uncertainty caused by military conflict and economic turmoil.

Accurate macroeconomic forecasting during wartime is vital for shaping effective economic policies. Adapting to new external shocks requires a clear strategy to minimize adverse effects on citizens and enterprises. Monitoring consumer demand and inflation trends enables the NBU to respond promptly to shifts in the economic environment, fostering stability and aiding Ukraine’s economic recovery.