Ukraine is in for yet another tough year according to the latest International Monetary Fund forecasts. While East Europe in general will suffer from double-dip recession in the euro zone, Ukraine ties for the region’s last place with no growth whatsoever expected in 2013.
Excessive austerity is bringing down global growth, the IMF warned on April 16. New forecasts cut global growth to 3.3 percent from 3.5, while the euro zone will contract 0.3 percent instead of 0.1.
That recession is spilling over into emerging Europe, cutting growth prospects throughout the continent’s eastern half. The hardest hit: Ukraine and Hungary, both expected to end the year flat.
Commenting on the region, the IMF noted downside risks prevailed, meaning any surprises would likely be for the worse. Regarding Ukraine, the fund claimed gas sector reform was long overdue, and the growing current account and budget deficit had to be addressed promptly.
It’s no secret the country is on the wrong track. The recession started at the end of 2012 and investment is down. Two weeks of talks with the IMF over a renewed lending program for Ukraine, widely believed to be critical for the nation to avert crisis this year, came to a fruitless end on April 10.
Instead, to meet a record high $10.5 billion foreign currency debt redemption schedule in 2013, the government has turned to more expensive bonds, so far raising $4.7 billion.
But some believe the international lender is too pessimistic. According to Alexander Valchyshen, head of research at investment bank ICU, the unsuccessful talks could be one reason for the bearish forecasts. He estimates this year’s growth should be between 0.5 and 1 percent.
“The IMF is merely posting its dissatisfaction with Ukraine’s authorities who refused to implement the IMF’s pre-determined economic policymaking changes,” Valchyshen wrote to investors.
Kyiv Post editor Jakub Parusinski can be reached at [email protected]
