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Ukraine’s Second-Quarter GDP Shrinks 1.1% in Year on Weak Demand

July 31 (Bloomberg) -- Ukraine’s economy contracted for the fourth quarter on an annual basis as industrial production slumped because of weak global demand for the country’s products.

Gross domestic product shrank 1.1 percent in the second quarter from the same period a year ago, matching the median estimate in a Bloomberg survey of eight economists, the state statistics committee, based in the capital Kiev, said in a statement on its website. The economy slid 0.4 percent in the first three months.

Ukraine slipped into recession in mid-2012 as Europe’s debt crisis curbed demand for export goods such as steel. The country exited its second recession in four years in the first quarter of this year after GDP grew 0.6 percent from the previous three-month period.

“A low comparison base and a strong harvest, which is expected to increase from the previous year on higher yields, will help GDP to advance in the second half of the year,” Olena Bilan, the chief economist at Dragon Capital Investment bank, said by phone. “We maintain our full-year projection of 0 percent growth.”

Ukraine’s grain harvest will climb 20 percent to about 56 million metric tons this year, according to estimates by the Agriculture Ministry.

The government also plans to resume cooperation with the International Monetary Fund late this year and secure an agreement for a “long-expected” new loan program of about $15 billion, Ukrinform newswire reported yesterday, citing First Deputy Prime Minister Serhiy Arbuzov.

The government has failed to seal a third IMF bailout since 2008 because of disagreements over heating subsidies.

Ukraine’s government bonds due 2023 rose, pushing the yield down to 9.439 percent as of 11:34 a.m. in Kiev from 9.463 percent yesterday, data compiled by Bloomberg shows. Ukraine’s hryvnia strengthened against the dollar to 8.1170 from 8.1278 yesterday.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net;

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