"The escalation of the conflict in the East and the sharp depreciation of the hryvnia in early 2015 deepened the recession in 2015: Q1, raised inflation, and eroded further bank balance sheets," the IMF said.
The forecast for Ukraine's economic development released by the IMF in April became no longer relevant in June, according to the IMF.
"The 2015 baseline growth projection has been marked down to -9% (relative to -5.5% at the EFF [Extended Fund Facility] approval); the 2015 inflation has been revised upwards to 46% at end-2015, compared to 27% at program approval," the IMF said in the report.
According to IMF experts, growth is expected to start recovering in the second half of the year, supported by growing consumer and investor confidence, gradual rehabilitation of the banking system, and restoration of broken supply chains in metals, mining, and energy production. Later on, manufacturing should also start benefitting from the restored competitiveness of Ukraine’s exports. However, the recovery is expected to take hold only gradually through 2016.
"Medium-term growth projections remain unchanged," the IMF said in the report.
"The average exchange rate is projected at UAH 22/US$1 in 2015, taking into account the recent stabilization of the hryvnia and assuming a slow depreciation in 2015: Q3 and Q4, reflecting seasonal factors and the programmed reserve accumulation," the report reads.
