Economy ministry: Donbas trade blockade doesn`t stop growth in Ukraine

Ukraine`s Economic Development and Trade Ministry says the blockade of trade with occupied areas in Donbas has affected industrial production, but still cannot stop economic growth in Ukraine, according to the ministry`s press service.

”A halt to goods shipments moved across the contact line by rail and road within Donetsk and Luhansk regions has become a new challenge in 2017, which caused a certain decline in real GDP compared to the fourth quarter of 2016. However, it did not stop economic growth, and real GDP rose by 2.4% in the first quarter of 2017 year-over-year,” the report said.

Moreover, the growth was propped up by the expansion of the service industry amid negative dynamics in the key production areas, namely agriculture and industry, the ministry said.

Earlier, Ukrainian President Petro Poroshenko on March 16 enacted a decision by the National Security and Defense Council of Ukraine to suspend all freight traffic with the Russian-occupied areas in Donbas, except humanitarian supplies.

In response to the blockade, Donbas militants announced the ”nationalization” of enterprises located behind the contact line and owned by Rinat Akhmetov`s SCM financial and industrial group. Following that, the SCM management reported it had lost control of the assets.

The government estimates that the blockade will cost Ukraine 1% of GDP growth in 2017.

Memo. Ukraine`s GDP rose by 2.4% in the first quarter of 2017 year-over-year, whereas it was 0.3% down from the fourth quarter of 2016, Ukraine`s State Statistics Service said.

Ukraine`s GDP is expected to increase by 1.9% in 2017, by 3.2% in 2018, and by 4% in 2019, according to Ukraine`s National Bank estimates.

The International Monetary Fund forecasts the country`s GDP will grow by 2% in 2017, by 3.2% in 2018, and by 3.5% in 2019.

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