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Wednesday, November 7, 2007

New Forecasts From World Bank

The World Bank expects that GDP growth in Ukraine in 2007 will be 6.7%, while earlier the forecast was 6%. According to a World Bank report, the index of consumer prices is expected to grow by 12.5% in 2007, though the bank's previous forecast was 9.7%.

According to the bank, in 2008, 2009 and 2010, Ukraine's GDP is expected to grow by 5.5%, 5% and 5% respectively. Inflation in these years is expected to be 9.6%, 8.3% and 7.4% respectively.

Earlier this year, in July, the World Bank reviewed its forecast for Ukraine's real GDP growth in 2007 upwards from 5.5% to 6%, while the inflation forecast was changed from 10.9% to 9.7%.

Ukraine's real GDP growth was 7.1% in 2006, while in 2005 it was 2.7%. The government forecasts a GDP growth slowdown to 6.5% in 2007, along with a fall in inflation from 11.6% to 7.5%.

Ministry of Economy have also improved their GDP forecast: in October their forecast for GDP growth for 2007 was 7%, while in July it was 6.9%, according to a posting on the
Ministry's official Web site. However, the ministry said that the inflation forecast for 2007 had risen in October to 11.6% from 8.6% in July.

According to an October consensus projection, GDP growth in 2008 will be 6.4% with 9.8% inflation, while in July 2007 these figures were 6.4% and 7.9% respectively.

The exchange rate by late 2007 will be UAH 5.05/$1, while in July it was forecasted at UAH 5.07/$1, and by late 2008 it will be UAH 5.06/$1 (UAH 5.11/$1).

At the same time, World Bank experts stress that it would be expedient to make the exchange rate of the hryvnia, Ukraine's national currency, more flexible, as the revaluation of the hryvnia could slow the pace of inflation in the country.

Although Ukraine was possibly not ready for a shift to a free floating exchange rate, the revaluation of the hryvnia could, under current conditions, treat the fever on the markets.