KYIV (Reuters) – Ukraine’s central bank lowered its main interest rate to 13.5% from 14.5% on Thursday to support the wartime economy, but said it had cut its 2024 GDP forecast to 3% from 3.6% due to Russian air strikes on the energy system.
The central bank said it saw room to further ease its main interest rate after long-delayed U.S. aid was finally approved this week with inflation in Ukraine lower than initially forecast so far this year.
“The economic recovery will continue, but (it) will be restrained – primarily, due to significant damage to energy infrastructure,” it said in a statement.
Russia has heavily bombed the Ukrainian energy sector in recent weeks, targeting power stations and substations and forcing authorities to introduce rolling blackouts in several regions.
“The course of the full-scale war continues to be the key risk to inflation dynamics and economic development,” the central bank said.
It said that real GDP growth in the first quarter had been weaker than expected, mainly due to limited budget spending amid uncertainty over foreign financial aid. It provided no figures.
Over the course of 26 months of full-scale war with Russia, Ukraine has managed to maintain economic and financial stability with the help of billions of dollars in financial aid from its Western partners.
The central bank said Ukraine could expect about $38 billion in Western financial aid this year.
Thursday’s monetary policy meeting was the second in a row to cut the main interest rate.
