EBRD Forecasts Ukraine's GDP Growth At 1.2% In 2006.

The EBRD estimates that Ukraine’s GDP will grow by 1.2% yoy in 2006. According to the bank’s forecast Ukraine will show the lowest economic growth rate of all of the 27 countries in Central and Eastern Europe. The EBRD attributes this mainly to a sharp price increase for imported natural gas. Concorde Capital: Increased prices for imported gas from Russia in January to USD 95 for 1,000 cm caused serious problems for certain sectors of the Ukrainian economy. Producers of nitrogen fertilizers and steel suffered the most, dropping 0.7% yoy and 1.7% yoy in 1Q06 respectively. Given their significant portion (29% in 1Q06) in total industrial output, the negative trend in these sectors will be a major retractor for economic growth in 2006. However the promising quarterly growth posted by the machine-building (+9.1% yoy) and food (+7.7%) industries leave room for hope that if growth persists, these two sectors can gain enough weight in total production to offset the fall in metallurgy and chemicals. Currently the machinery and food segments account for 26% of Ukraine’s industrial output. Additionally, the trade and construction segments which were factors pulling Ukraine’s GDP down last year, demonstrated positive growth rates at 2.2% yoy and 5.0% yoy in 1Q06. We maintain our annual GDP growth for 2006 at 3.0% yoy.