EBRD keeps Ukraines GDP growth forecast at 2.5% in 2012.

By bne IntelliNews July 26, 2012
The EBRD has kept its GDP growth forecast for 2012 at Januarys level of 2.5%, shows the latest Regional Economic Prospects report, prepared by the European Bank for Reconstruction and Development (EBRD). At the same time, the EBRD notes that Ukraines economy has already been affected by the deteriorating external conditions. Lower external demand for major export products as well as declining steel prices led to a contraction of machine building (8.9% y/y in June alone) and steel sectors (1.4% y/y in H1 and 0.8% y/y in June alone). Increase of real wages (17.8% in May in annual terms) and holding of Euro 2012 championship in Ukraine were stimulating factors of the growth in retail trade in H1 (up by 18.3% y/y). At the same time, conclusion of public infrastructure investments related to the Euro-2012 has led to a deceleration of construction. Moreover, the EBRD notes that agricultural production has also slowed down due to unusually cold winter. This, however, contradicts the results provided by State Statistics Service of Ukraine, which states that in H1, agricultural output showed growth of 7.4% y/y. The production index of agricultural enterprises grew by 11.8%, private households by 4.4%. The aggregate index of agricultural production for 2011 increased by 17.5%, for five months of 2012 by 1.5%. The EBRD continues, pointing out that even though, the government has implemented some of the conditions under the 2010 IMF programme (including parametric pension reform), still measures necessary to stabilize the gas sector, including household tariff increases, continue to face political resistance. Moreover, the financial conditions have deteriorated, and international capital markets actually closed, the authorities tightened monetary policies and utilised administrative measures to maintain the hryvnias external stability, credit growth came to a halt. In addition, recent adoption of package of social and wage expenditures may increase fiscal pressures before the parliamentary elections in October. Processes in the EU will remain an important factor for the country's economic growth and economic stability in the coming months, the EBRD summed up.

EBRD keeps Ukraines GDP growth forecast at 2.5% in 2012.

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