Steel production fell 43.1 percent in March from the same month a year ago, while machine building was down 53 percent and chemical output dropped 29.8 percent. These three industries form the core of Ukraine’s key exports, which constitute some 56 percent of the country’s gross domestic product.
There were, however, some tentative signs of slight recovery, since month on month, production was up 8.3 percent, following a 5.4 percent increase in February, led by food and chemicals, according to the statistics office. Over the whole fisrt quarter output fell 31.9 percent compared with the same period a year ago.
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The International Monetary Fund (IMF) has changed its forecast for the fall in Ukraine's GDP in 2009 from 3% to 8%, but it expects the country's economy to resume growth next year.
In 2010, Ukraine's GDP will grow by 1%, according to the revised forecast contained in the IMF's World Economic Outlook published on Wednesday.
According to the forecast, Ukraine's average annual inflation will slow from last year's 25.23% to 16.8% this year and 10% next year.
At the same time, the current account surplus will reach 0.6% of GDP this year and 1.4% of GDP next year compared, to a deficit of 3.7% of GDP in 2007 and 7.2% of GDP in 2008.
IMF experts say that among all the regions of the global economy, the CIS countries are forecast to experience the largest reversal of economic fortune over the near term. The reason is that their economies are being badly hit by three major shocks: the financial turbulence, which has greatly curtailed access to external funding; slumping demand from advanced economies; and the related fall in commodity prices, notably for energy.
"Russia, Kazakhstan, Belarus, and Ukraine were hit hard, with the first two drawing down large amounts of foreign currency reserves to buffer the impact of the shock on the exchange rate," reads the World Economic Outlook. "These economies are expected to have only very limited access to external financing over the near term, with the exception of Russia, which should be able to better sustain rollover rates." IMF experts stress that Belarus and Ukraine have faced difficulties meeting their external obligations and have received IMF financing; Armenia and Georgia are also receiving IMF support, although Georgia's arrangement predates the financial crisis.
IMF experts emphasize that the key challenge facing policymakers in the CIS is to strike the right balance between using macroeconomic policies to buffer the effects of net capital outflows on activity and maintaining confidence in local currencies.
The problem these economies face is that rapid currency depreciation raises the effective debt burden on nonfinancial firms that have borrowed in foreign currency. In fact, the share of foreign-currency-denominated credit in domestic bank credit stretches from close to 30% in Belarus and Russia, to about 50% in Kazakhstan and Ukraine, and to some 70% in Georgia. Meeting these foreign currency obligations as exchange rates depreciate has required major cutbacks in investment and employment in several of these economies.
By the same token, the experts continue, defaults would further exacerbate already intense strains on bank balance sheets and diminish prospects for renewed credit growth.
The IMF says the state support of the Ukrainian banking system is extremely important, pointing out to Ukraine's weak fiscal resources.
It will be interesting to see how Ukraine's American bankster led economy fairs compares to Belarus's Russian gangster led economy. I bet the Russian thuggery beats American Usury.
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