Country Economic Forecasts > Ukraine

After contracting by some 11% in 2015, the economy appears to have turned the corner, with Q3 GDP rising 0.5% from Q2 and the annual decline slowing to 7.2% from 14.6%. The economy will return to weak growth of about 2% in 2016, held down by severe structural constraints and low prices for key exports, before a moderate pick-up to 3% growth in 2017-18. Having averaged 48% in 2015, inflation is set to slow to 18% this year, as ongoing IMF support and current account correction restore UAH stability after its decline of over 50% since the economic crisis erupted in 2014.Benefiting from sharp UAH depreciation and partial recovery of supply chains disrupted by conflict in the East, exports will return to growth in 2016. As continued weakness of consumer demand and low oil prices dampen import growth, net exports will remain a positive driver of growth in 2016. Redirection of trade away from Russia will continue, as Russia scraps its free-trade pact with Ukraine and remains in recession. Despite ongoing support from the EU and IMF, risks remain on the downside as 'frozen' conflict with Russia holds back economic recovery, and the drop in living standards after separatist fighting and budget cuts erode support for the pro-reform government.