Ukraine’s economy set for 7.5% contraction

29 Apr 15

Ukraine’s economy is expected to shrink to 7.5% this year, following a 6.8% contraction in 2014 as a result of the conflict in the country and the Russian annexation of Crimea, the World Bank has said.

The analysis of the country found the country’s recession would deepen this year because fighting in the east of the country had hindered efforts to stabilise the economy. Rebels have destroyed production facilities and infrastructure, exports have fallen and more money is being spent on security – all of which had hit investor and consumer confidence, the bank said.

However, it forecast that the country could return to growth of as much as 2% if the conflict abated and the government continued to implement reforms, especially in the energy and banking sectors.

‘Structural reforms – crucial for sustaining international financial support and for recovery – may be complicated by a fragile political environment and resistance from vested interests,’ the bank’s Economic Update stated.

It is also vital that the country improve its public finances, the report added. Reducing public debt would help rebuild investor confidence and restore access to international capital markets.

‘The need for budget discipline has to be balanced with reforms to create fiscal space for targeted investments in critical infrastructure and public services to support the weak real sector, generate employment, protect the vulnerable and lay the foundation for future growth,’ it stated.

  • Judith Ugwumadu
    Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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