Ukraine's central bank downgrades 2016 growth forecast

28th January 2016, Comments 0 comments

Ukraine's central bank more than halved its 2016 growth forecast Thursday as the cash-strapped country battles crises ranging from a fall in commodity prices to a new trade embargo by Russia.

The National Bank of Ukraine (NBU) also left its main borrowing rate unchanged at a growth-halting 22 percent in order to keep persistent inflation expectations in check.

The NBU said a number of unfavourable factors outside the war-scarred country's control had forced to revise down its growth forecast to 1.1 percent from the 2.4 percent it had predicted only two months earlier.

"A weaker-than-previously expected economic recovery can be attributed to lower-than-expected global commodity prices, deteriorating global economic growth prospects, and fresh trade restrictions imposed by the Russian Federation, including a ban on the transit of Ukrainian goods through its territory," the NBU said in a statement.

Russia this month expanded its embargo on Ukrainian products and restricted their movement across its territory to other markets in response to its westward-leaning neighbour's decision to join an EU free-trade and political association pact.

Ukraine's economy relies heavily on grain and various metals exports that have been falling in price in line with that of oil over much of the past year.

The bank said it may resume interest rate cuts to spur growth "provided that inflationary risks subside primarily due to the stabilisation of the global commodity markets and the disbursement of the next tranches of official financing."

Ukrainian Finance Minister Natalie Jaresko said this week she expected the former Soviet republic to receive about $10 billion (9.2 billion euros) in assistance from the International Monetary Fund and other sovereign lenders this year.

Interfax separately reported that the NBU had issued an initial economic contraction reading of 10.6 percent for 2015 -- broadly in line with both government and IMF forecasts.

© 2016 AFP

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