Kiev: Ukraine’s economy is likely to shrink by 8 per cent this year and contract again next year because of the effect of the separatist war in the industrialised east, the World Bank said on Thursday.
The bank had previously expected Ukraine’s gross domestic product would contract by 5 per cent this year and then grow 2.5 per cent next year. It now expects the economy to contract by 1 per cent in 2015.
“Disruption in economic activity in the east has resulted in a sharper GDP decline. We project that GDP will be an 8 per cent decline in 2014,” Qimiao Fan, the World Bank’s chief representative for Ukraine, told reporters.
The bank’s forecast was the latest downbeat assessment for the economy because of the conflict which has hit steel, chemicals and coal output particularly hard in the eastern Donetsk and Luhansk regions.
“The share of these two regions in GDP is about 16 per cent,” Fan said. Donetsk and Luhansk accounted for about a quarter of industrial output, 7 per cent of the agricultural sector and 27 per cent of exports, he said.
Finance Minister Oleksander Shlapak said last month that the Kiev government expected GDP to shrink by 6 per cent this year.
Ukraine’s central has said the economy would shrink by as much as 10 per cent this year, while the International Monetary Fund has predicted a 6.5 per cent contraction.
