Ukrainian GDP Plunges 5.1% Amid Deadly Conflict in Nation’s East

Maidan Square file photo

(Bloomberg – bloomberg.com – Daryna Krasnolutska – October 30, 2014) Ukraine’s economy shrank 5.1 percent in the third quarter from a year earlier, the most in almost five years, as industrial production and the hryvnia slumped amid the bloody conflict in the country’s east.

The drop is less than the 9 percent median estimate of six economists in a Bloomberg survey. Seasonally adjusted gross domestic product fell 2.1 percent from the previous quarter, the state statistics committee said today on its website.

Months of fighting have left pro-Russian rebels in control of a swathe of Ukraine’s easternmost regions, which generated almost a quarter of industrial output at the start of the year. The knock-on effects of idle factories are seeping through an economy at risk of a 10 percent contraction in 2014, according to Ukraine’s central bank. The International Monetary Fund says a $17 billion bailout loan may not be enough to avert a default.

Prime Minister Arseniy Yatsenyuk said last month pro-Russian militants were purposely ruining plants, roads and other infrastructure in the Donetsk and Luhansk regions that are home to the bulk of Ukraine’s steel mills and coal mines. The economy may only return to growth in 2016, he said.

Industrial output sank 12.1 percent from a year earlier in July, 21.4 percent in August and 16.6 percent last month. Central bank reserves have tumbled toward a nine-year low as the hryvnia plunged 36.67 percent this year, the most in the world, data compiled by Bloomberg show.

An IMF mission will visit Ukraine to assess increasing the loan once a new cabinet is formed, central Bank Governor Valeriya Gontareva said Oct. 16. Snap parliamentary elections on Oct. 26 delivered a landslide victor for pro-European parties led by President Petro Poroshenko’s bloc and Prime Minister Arseniy Yatsenyuk’s People’s Front.

Article ©2014 Bloomberg L.P. All Rights Reserved. Article also appeared at bloomberg.com/news/2014-10-30/ukrainian-gdp-plunges-5-1-amid-deadly-conflict-in-nation-s-east.html

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