Ukrainian Recession Will Push Government Toward IMF, ICU Says

Ukraine’s government will be pushed to agree on International Monetary Fund aid because of its weak economy, according to Investment Capital Ukraine.

After shrinking 1.3 percent from a year earlier in the third quarter, the economy is probably in a “double-dip recession,” ICU said today in an e-mailed report. Even after contracting in some quarters, gross domestic product will advance 0.2 percent this year, before growing 1.7 percent in 2013, it predicted.

“It’s very likely this recession will spill over well into next year,” ICU said today from the capital, Kiev. “These conditions are pushing Ukraine toward striking an agreement with the IMF very early next year to resume receiving funding under the condition of carrying out economic reforms.”

The former Soviet state is seeking to renew lending from the IMF after disbursements from a 2010 program were frozen last March because the government refused to cut household heating subsidies. An IMF mission was supposed to arrive to Kiev in the second half of January for talks.

The hryvnia, which has lost 0.8 percent against the dollar this year, may decline to 9 by end-2013 as the IMF demands a more flexible exchange-rate regime, according to ICU, which forecasts the current-account deficit will narrow to $10.9 billion next year from $14.7 billion in 2012.

To contact the reporter on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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