KIEV (Reuters) - The World Bank expects Ukraine’s economy will be flat this year following a weak first-half performance, it said on Monday, cutting its previous forecast for 1 percent growth.
The former Soviet republic’s export-oriented economy, dominated by steel production, dipped into recession in the second half of 2012 due to declining global demand for metals and it continued to contract in the first half of this year.
“We expect that growth of GDP will resume in the second half of this year but it will not be enough to compensate the fall in the first half,” World Bank analyst Anastasia Holovach told a news conference in Kiev.
Ukraine has been under scrutiny by ratings agencies on concerns that it could default on its debt.
Its $15 billion loan program with the International Monetary Fund was suspended in 2011 after Kiev failed to raise domestic gas prices in line with the Fund’s demands.
Loan repayments to the IMF are eroding Ukraine’s foreign exchange reserves. The government said last week it would seek to borrow $1.5 billion abroad this year and try to raise another $4 billion next year to help it service its foreign debt.
Ukraine’s GDP declined by 1.1 percent and 1.3 percent in the first and second quarters of this year respectively from a year earlier, according to the State Statistics Service.
Analysts forecast economic growth of no more than 0.1 percent this year.
The government has not revised its forecast for GDP growth of between 2.5 and 3.4 percent.
It approved a 2014 draft budget last month that projects economic growth next year of 3 percent.
Reporting by Natalia Zinets; Editing by Susan Fenton