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Ukraine: Despite political risks, the economy and financial markets (still) remain calm

While the geopolitical tensions between Russia and Ukraine dominate the international news, the impact on the Ukrainian economy has been relatively moderate so far.



In this regard, the Frankfurter Allgemeine Zeitung asked a number of German and Austrian business representatives and economists about their assessment of the situation, including Robert Kirchner, Deputy Team Leader of the German Economic Team. Kirchner does not see any serious effects of the geopolitical tensions on the economic situation so far. There is neither a flight into the dollar, nor is there any panic buying by Ukrainian consumers. The German Economic Team expects a real GDP growth of 3.3 per cent this year for 2022, if geopolitical tensions do not intensify (see the respective forecast by the German Economic Team).

On the financial markets, however, for which the conflict did not play a significant role for a long time, the risk premium for Ukrainian government bonds rose significantly recently. Nevertheless, the Ukrainian government is not expected to run into financial difficulties. Ukraine can still draw on funds from the current IMF programme as well as financial aid from the EU. Thus, the macro-financial stability of the country is secure for the time being – that could still change, however, as the conflict is dragging on, as Kirchner points out.

Read the full article (in German) at faz.net