In the second half of 2014 we expect economic downturn to deepen due to prolonged conflict in Eastern Ukraine and related damage to infrastructure. Fiscal tightening approved to comply with IMF program will also impact economic activity. Real GDP may fall by 6-7% yoy in the second half of the year after real GDP fell by 3% yoy between January and June. Exchange rate will appreciate slightly after conflict ends in the Eastern Ukraine.
In 2015 we project higher than previously expected economic growth reflecting low statistical base (i.e. resumption of suspended economic activity in late 2014) and reconstruction in Eastern Ukraine. Increased exports and investment from demand side will also support recovery.
