the forecast horizon. however, a prolonged, high - intensity war threatens to further destroy cities, infrastructure, and production facilities, and the extent of the destruction is difficult to estimate in advance. compared to the previous forecast, the risk of insufficient international financing this year has eased considerably, but the risks to regular financing remain. the following risks also remain significant : 2 / 4 bis - central bankers'speeches the emergence of additional budget needs to maintain defense capabilities or cover substantial quasi - fiscal deficits, in the energy sector in particular heavy damage to infrastructure, especially energy and port infrastructure, which will limit economic activity and put supply - side pressures on prices the continuation of the partial blockade of freight transportation at border crossings with some eu countries, which will depress exports and make imports more expensive the deepening of adverse trends in migration, and the aggravation of the situation in the middle east, which, in particular, increases the risks of possible disruptions to energy supplies and a rise in energy prices for the global economy. at the same time, a number of positive scenarios may still materialize, including further expansion of export opportunities, the transfer of funds from immobilized russian assets to ukraine, the acceleration of european integration processes, and the implementation of a large - scale recovery program. taking into account the balance of risks, as well as favorable macrofinancial trends, in particular better inflation dynamics, the nbu board decided to cut the key policy rate by 1 pp, to 13. 5 %. the previous steps to ease interest rate policy and changes in the operational design of monetary policy gradually decreased nominal yields on hryvnia deposits and domestic government debt securities. at the same time, on the back of the overall improvement in inflation expectations, these instruments remained attractive and in demand. a moderate cut in the key policy rate should not diminish interest in hryvnia assets, as they will continue to protect savings from being eroded away by inflation. the nbu is also cutting the interest rates on overnight certificates of deposit and threemonth certificates of deposit, to 13. 5 % and 16. 5 % respectively. what is more, the nbu is decreasing the interest rate on refinancing loans more pronouncedly – by 2 pp, to 17. 5 %. in the context of the interest rate policy easing cycle, the need to maintain a significant difference between the interest rate on refinancing loans and the key policy rate is diminishing. with

##sinflation in ukraine and require a review of utility tariffs. taking into account the above and the consequences of the war, the nbu expects inflation will drop to 20. 7 % in 2023, and 9. 4 % in 2024. inflation will return to the 5 % target in 2025. what will be the overall state of the ukrainian economy? economic activity has been reviving in ukraine since april 2022, particularly due to the liberation of northern oblasts and a decrease in the number of regions affected by active hostilities. in the meantime, hostilities in the east and south of the country, destruction of infrastructure in various regions, the blockade of sea ports, and weak demand in the majority of sectors are restraining the economic recovery. losses in the agricultural sector also make a large impact. the economy will thus shrink by a third in 2022 because of the war. when the active phase of the war is over, it is expected that consumer demand will rise, technological and logistical processes will be set up, and investment activity will recover, among other things, thanks to ukraine's european integration prospects. this will enable the ukrainian economy to return to growth. at the same time, the large losses of production and human potential caused by the war and security risks will be a drag on economic growth. the nbu expects the ukrainian economy will grow at the rate of around 5 % – 6 % per year in 2023 – 2024. what does the materialization of the nbu's baseline scenario depend on? ukraine's continued cooperation with its international partners will remain one of the key factors in supporting the economy during the full - scale war and contributing to its recovery after the active phase of hostilities ends. ukraine will continue to work closely with international financial organizations in 2023, including through the launch of a new imf program to support macroeconomic stability in the country. ukraine's cooperation with the imf and continued european integration will help the country implement other structural reforms. a prudent economic policy is also a necessary prerequisite for delivering macroeconomic stability and ensuring the nbu's baseline scenario materializes. under the current conditions, it envisages : narrowing the budget deficit through prioritizing expenditures and raising revenues gradually reducing imbalances in the energy sector replacing the monetary financing of the budget with market borrowing decreasing demand for imports by imposing additional taxes discontinuing the practice of monetizing the state budget deficit. 2 / 4 bis - central bankers