Ukraine Sees No New IMF Loan After Trip as Recession Returns

Ukraine doesn’t expect a visit by the International Monetary Fund to immediately result in a new bailout loan, a government official said as data showed the economy slipped into its second recession in four years.

An IMF mission arrived yesterday with the primary goal of assessing recent government changes, Economy Minister Ihor Prasolov said today in the capital, Kiev. The former Soviet republic’s economy shrank for a second quarter between October and December as steel output declined, official data showed.

Ukraine is seeking its third bailout in four years as the economy contracts and officials grapple with a widening current-account gap, foreign reserves that have dipped below three months of imports and $10 billion of debt payments scheduled for this year. The government wants to borrow about $15.4 billion on same terms as its last aid package, which expired in December.

“The mission will probably announce pre-conditions for a new loan, leaving the ball in Ukraine’s court,” Olena Bilan, chief economist at Kiev-based Dragon Capital, said by phone. She “expects a deal with IMF to be eventually reached” this year.

Bonds, Hryvnia

Government bonds due 2022 fell for the first time since Jan. 25, pushing the yield up to 7.22 percent. The hryvnia, which has fallen 1.4 percent against the dollar during the last year, closed at 8.1250, unchanged from yesterday.

“Signing a memorandum in Kiev when the mission ends at the start of February isn’t envisaged,” Prasolov told reporters, declining to say when an accord may be reached. “The mission’s main aim is to study the situation in Ukraine.”

Seasonally adjusted gross domestic product fell a preliminary 0.9 percent from the previous three months in the fourth quarter after declining 1.2 percent in the July-September period, the State Statistics Committee, based in the capital, Kiev, said today on its website. GDP dropped 2.7 percent from a year earlier, missing the 1.8 percent median estimate of nine economists in a Bloomberg survey.

Industrial output fell for the first time since 2009 last year, dropping 1.8 percent after a 7.6 percent jump in 2011 as metals output plunged 5.2 percent, official data show.

Reserves declined to $24.5 billion in December from $38.2 billion in August 2011 as last year’s current-account gap widened to a record $14.4 billion. Imports averaged $8.6 billion a month in 2012, according to the central bank.

Ukraine’s economy, which rose 0.2 percent in all of 2012, will expand by 3 percent to 4 percent this year, Prime Minister Mykola Azarov predicts. That’s more optimistic than Goldman Sachs Group Inc., which estimated Jan. 24 that GDP will contract 1.8 percent.