A more stable political environment and progress on the IMF program should help economic growth to pick up pace throughout the year. However, the economy will remain in a fragile state and the recovery is expected to be modest compared to last year’s pace of decline. The FocusEconomics panel sees the economy growing 1.2% this year, which is up 0.1 percentage points from last month’s forecast. For 2017, the panel sees GDP growth accelerating to 2.5%.
After over two-years of contraction, Ukraine’s economy returned to growth in Q1, although the pace of expansion was meagre and driven mainly by base effects. Fewer military clashes and more stable price pressures have helped lead to a stabilization in economic data. The modest recovery path seems to have continued in Q2, with industrial production recording the fourth consecutive expansion in May. In the political arena, the Parliament approved a key judicial reform bill, the first major reform since the new government took office in April. The vote unlocked the third USD 1.0 billion loan from the United States and paves the way for a disbursement of IMF funds in July. Following the approval of the bill, S&P Global Ratings affirmed Ukraine’s B- rating and stable outlook as it is confident that the country will continue implementing structural reforms.
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