Ukraine's economy shrinks as fighting takes a toll

by Reuters
Wednesday, 30 July 2014 09:29 GMT

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KIEV, July 30 (Reuters) - Ukraine's economy contracted by 4.7 percent year-on-year in the second quarter in a sign of the impact of fighting in the east of the country.

The national statistics office also said on Wednesday GDP had shrunk by 2.3 percent in the past three months. The rebellion by pro-Russian separatists in eastern Ukraine began in April.

Kiev had initially expected a 3-percent fall year-on-year in the whole of 2014 but the conflict has put additional strains on the state budget and deepened Ukraine's recession.

There had been a 1.1 percent fall in Gross Domestic Product in the first three months of the year. Ukraine's economy first went into recession in the second half of 2012 and there was no growth in the whole of 2013.

The International Monetary Fund, which agreed a $17 billion bailout for Kiev, sees Ukraine's GDP falling by 6.5 percent this year.

"Higher frequency indicators have suggested a much sharper hit to economic activity from events in the Donbas (in east Ukraine) over the past few months, and likely a larger hit to real GDP," Timothy Ash, head emerging markets analyst at Standard Bank in London, said in a research note. (Reporting by Gabriela Baczynska and Natalia Zinets, Editing by Timothy Heritage)

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