Fast Market Research recommends "Ukraine Business Forecast Report Q3 2013" from Business Monitor International, now available

Boston, MA -- (SBWire) -- 08/06/2013 --In line with our view for Ukraine to enter a recession in 2013, real GDP contracted in Q113 for a second consecutive quarter in yearon- year (y-o-y) terms, shrinking by 1.1% on the back of weak exports and minimal fixed capital investment.

We maintain our expectations for growing external account imbalances to drive a devaluation of the hryvnia by end-2013.

Political risks are likely to increase over the next 12 months. The imprisonment of former Prime Minister Yulia Tymoshenko has severely soured relations with the EU, and bilateral relations with Russia remain tense over the issue of Ukraine's gas imports.

Major Forecast Changes

We have downgraded our outlook for real GDP growth for 2013 and 2014, and now expect GDP to contract by 1.4% in 2013 and grow by just 1.0% in 2014. This change reflects our bearish outlook for global metallurgical markets next year, our expectations for hryvnia devaluation, and expectations of a retrenchment in government spending.

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We have adjusted our expectations for Ukraine's fiscal deficit in 2013 and 2014, to 3.5% of GDP and 2.2% respectively. Weak revenues and imprudent social spending will expand the deficit this year, and borrowing costs will remain high.

Key Risks To Outlook

A sharper-than-expected devaluation could trigger major shock waves through the domestic economy, particularly within the financial sector, which has barely recovered from the 2008 devaluation. Existing capital buffers may prove insufficient to deal with a devaluation of 20% magnitude or greater.

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