12:45 20.03.2017

Transport blockade could worsen Ukraine's annual trade deficit by 1.7% of GDP – Dragon Capital economist

The transport blockade of the Ukrainian government uncontrolled areas in Donetsk and Luhansk regions would slow down growth of the Ukrainian economy in 2017 by around 1 percentage point, but the impact on the balance of payment would be larger, Senior Economist at Dragon Capital Olena Belan has said.

"The influence of the blockade on the balance of payment would be larger, as the loss of exports income in the metal sector would be seen, and more foreign currency would be required to import coal. According to our estimates, the additional trade deficit could be around 1.7% of GDP," she told Interfax-Ukraine.

Belan said that these are approximate estimates, as there is no concrete information where coal will be bought and in what amount.

She said that this deficit would press on the hryvnia exchange rate if it is not compensated by an additional inflow of foreign capital.

"We have revised downwards the forecast for the foreign currency exchange. We expect that the hryvnia would weaken to UAH 29/$1 this year," she said.

She said that the influence on the currency market is not felt now, as there is a time lag between production of goods for exports, its sale and return of foreign currency income.

"We expect that GDP growth this year will be 2.5% after a rise by 2.2% in 2016. The deficit of the current account would expand to 4.2% of GDP from 3.5% of GDP last year," she said.

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