Ukraine econ­omy shrank 7.5% in ‘the worst year since WWII’


Ukraine’s cen­tral bank chief said on Tues­day that the strife-torn coun­try’s econ­omy con­tracted by 7.5 per­cent in 2014 while in­fla­tion soared in a year more painful than any since World War II.

But Va­le­ria Gontareva said the pro-Western lead­ers who rose to power in Kiev after the Fe­bru­ary ouster of an un­pop­u­lar Moscow­backed pres­i­dent were op­ti­mistic about the chances of a re­bound in 2015.

Gontareva’s com­ments came a day after par­lia­ment ap­proved an aus­ter­ity bud­get that should help un­lock emer­gency as­sis­tance from the In­ter­na­tional Mon­e­tary Fund ( IMF) and other global lenders within the next few months.

The cen­tral bank head — crit­i­cized in the me­dia for fol­low­ing IMF ad­vice and al­low­ing the hryv­nia cur­rency to de­pre­ci­ate by about 50 per­cent — said the an­nual in­fla­tion rate had reached 21 per­cent by the end of Novem­ber.

“No mat­ter how sad it may sound, we have to say things as they are: our GDP fell by 7.5 per­cent and the cur­rency’s de­val­u­a­tion reached 50 per­cent,” Gontareva said.

The gov­ern­ment had ear­lier pro­jected growth to shrink by up to five ad­di­tional per­cent in 2015.

“Our coun­try has not lived through such a dif­fi­cult year since at least World War II,” Gontareva told re­porters.

“I think that what we have ex­pe­ri­enced this year will never hap­pen again. With­out ques­tion, we are look­ing for­ward to 2015 with op­ti­mism.”

Ukraine’s re­serves more than halved in 2014 and dipped to less than US$10 bil­lion for the first time in five years as the au­thor­i­ties sought to prop up the hryv­nia and fund their eight-month cam­paign against pro-Rus­sian rebels in the in­dus­trial east.

Pres­i­dent Petro Poroshenko said this month that the war was cost­ing Kiev more than 100 mil­lion hryv­nias (US$6.3 mil­lion) a day.

The cen­tral bank’s even­tual decision to let the hryv­nia float feely saw the cur­rency slip from 8.24 to the dol­lar at the start of the year to 15.82 on Tues­day.

Chronic short­ages of dol­lars and euros in re­tail banks have forced the gov­ern­ment to im­pose strin­gent cur­rency con­trols that slap lim­its on daily cash with­drawals and ex­changes.

The hryv­nia and the Rus­sian ru­ble have both lost about their half and turned into the year’s two worst per­form­ing cur­ren­cies in the world.

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