The Ukrainian economy, which is forecast to contract 6.5 percent in 2014, will post GDP growth of 1 percent in 2015, according to an economic memorandum the government sent to the International Monetary Fund (IMF).
The document, published on Tuesday, forecasts that inflation will total 19 percent in 2014, and slow to 9 percent in 2015.
The IMF pointed out that at the end of April, Ukraine forecast that GDP would decline 5 percent and inflation would equal 16.2 percent this year and that next year GDP would grow 2 percent with inflation at 7.4 percent.
The downgrade to the forecast is the result of the difficult situation in eastern Ukraine. The revised forecast assumes that the situation can be settled in a relatively short timeframe. If the conflict continues into 2015, GDP could contract 7.3 percent this year and 4.2 percent the next, while the National Bank of Ukraine’s (NBU) international reserves would shrink to $8.6 billion at the end of 2014 and $4.4 billion at the end of 2015.
Ukraine also forecasts greater hryvnia weakening, to Hr 12.50 per $1 at the end of 2014 from Hr 10.50 per $1 forecast previously and to Hr 13.30 per $1 at the end of 2015 from Hr 11.50/$1.
In 2016, Ukrainian GDP is forecast to grow 4 percent and inflation to slow to 6.9 percent. The hryvnia will be at Hr 13.40 per $1 at the end of the year.
