UKRAINE Economic Update
* The base effect that boosted growth rates earlier in 2010 is winding down, while the current account deficit is reemerging.
* Growth in 2011 is forecast to remain around 4 percent but needed structural reforms would provide significant upside over the medium term.
* Reforms have made some progress in the past six months, with pension reform remaining the most critical immediate challenge.
Recent Economic Developments
Ukraine’s economic recovery slowed in the third quarter of 2010. Real GDP grew by 3.5 percent 2010Q3 y/y, after 5.9 percent growth in Q2. A smaller grain harvest and subdued external demand contributed to the deceleration of GDP dynamics. But industrial production continues to expand at double-digits (10.7 percent y/y growth over 10 months) and domestic demand has started to pick-up driven by real income growth.
The current account deficit reemerged whilst consumer price inflation returned to single-digits. Since mid-year, the