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.