Ukraine's GDP could grow by 2% in 2016 after 5.5% fall in 2015 - IMF

Ukraine's real GDP is expected to contract by about 5.5% in 2015 with inflation spike to about 27% temporarily in response to the exchange rate depreciation and gas and heating tariff increases, the International Monetary Fund (IMF) has said.

"Ukraine’s economic prospects will improve in the medium-term. Real GDP growth is expected to rebound to 2% in 2016 and rise to 4% in the medium term," reads a press release of the IMF issued late on Thursday after the approval of the Extended Fund Facility (EFF) by the IMF Executive Board for Ukraine.

IMF said that buoyed by restored competitiveness, the current account deficit is projected to stabilize at around 1.25% of GDP in 2016–2018.

By end-2018, inflation will fall to mid-single digits and the NBU will build its international reserves to cover nearly 83% of short term debt, IMF said.

According to the press release, with sizable international assistance, gross international reserves will be gradually re-built, reaching around 3.3 month of imports coverage at end-2015 and by end-2018 the NBU will build its international reserves to cover nearly 83% of short term debt.

IMF said that the currency devaluation and official borrowing are expected to push public sector debt up to 94% of GDP and external debt to 158% of GDP in 2015. Following the debt operation and sustained fiscal adjustment, public debt is expected to decline to around 71% of GDP by 2020.