According to the estimates of IER experts, real GDP dropped by about 46% yoy in March 2022, and over the next three months, the rate of GDP contraction stabilized at the level of 39-40% yoy. 

In June, the contraction of real gross value added in the agricultural sector accelerated. This was primarily a result of the temporary occupation of the Kherson oblast and part of the Zaporizhia oblast, which substantially contributed to crop production (grain, vegetables, and fruits) in June 2021.

In the second half of the year, the IER forecasts a gradual improvement in the economic situation. As a result, real GDP is estimated to decline by about 30% yoy in 2022.

However, the GDP contraction may be much higher if inflation accelerates further, logistics do not improve, and hostilities intensify.

Meanwhile, the estimate might be improved if the Black Sea ports are unblocked, which has been discussed in Istanbul these days. Even though there is scarce information on possible agreements, it seems that for the moment only grain exports are discussed. This will raise the purchase price on the domestic market and improve the financial situation of agricultural companies. It could also reduce queues at river ports and railway border crossings as well as increase the volume of other freight transportation on these routes.

However, it is necessary to fully unblock the Black Sea ports, which would allow:

• to increase exports of steel products. This will support the recovery of economic activity in the sector, where some companies reduced or stopped production mainly due to a demand shortage and lack of logistical possibilities for exports. 
• to increase the demand for the workforce, which will lead to the reduction of unemployment and the restoration of the household income. This will contribute to private final consumption in Ukraine.
• to relaunch and make cheaper imports taking into account the elimination of the critical imports list. In particular, it may facilitate access to imported fuels, construction materials, and other production inputs required for the resumption of production and the reconstruction of damaged infrastructure and buildings. Budget revenue from the taxation of imports will increase as well.