Ukraine’s economy, shaken by the global financial crisis, will probably expand this year at less than half the pace in 2007, said Valeriy Lytvytskyi, the head adviser to central bank Governor Volodymyr Stelmakh, Bloomberg reported.
Economic growth probably will slow to between 1.5 percent and 2 percent this year from 7.6 percent last year, Valeriy Lytvytskyi said today in Kiev. The inflation rate “probably will be higher than 20 percent but less than 25.8 percent,” he said.
“The risk of recession is higher than the risk of inflation,” said Lytvytskyi. Investments, consumption and exports are flagging “because of falling prices in world market.”
A global recession is compounding problems in the region’s emerging markets, which are being battered by a lack of credit, weakening currencies and plunging demand for products. Ukraine turned to the International Monetary Fund with other emerging- market countries, including Iceland, Hungary and Latvia, to boost its financial system. The Washington-based lender backed a two- year, $16.4 billion loan last month.
The government expects the economy to grow between 3.5 percent and 4 percent this year.
Ukraine’s gross domestic product may contract by 7 percent to 10 percent in the first quarter of next year, said President Viktor Yushchenko in an e-mailed statement today.
The former Soviet economy, which expanded at an average annual pace of 7 percent since 2000, may shrink 5 percent next year, Oleksandr Shlapak, the president’s deputy chief of staff, said on Nov. 26. Latvia’s economy is also expected to shrink by 5 percent and Hungary’s by 1 percent.
Government Forecast
The government initially forecast economic growth of 6.8 percent this year and inflation of 15.9 percent. Industrial output, investment and strong domestic consumption were expected to fuel growth. Instead, industrial output plummeted by 28.6 percent in November from a year earlier.
There is a recession in the construction industry not seen “since 1998,” said Lytvytskyi. “The government needs to adopt a special program to boost construction next year.”
The hryvnia lost 36 percent against the dollar this year, undermining domestic consumption and hurting the banking system. It was traded at 7.9450 against the dollar as of 2:39 p.m. in Kiev, compared with 5.05 in January.
The hryvnia’s conversion rate will depend much of next year on the state budget, said Lytvytskyi. If the government increases social spending, it will add pressure on the currency and inflation, he said.
