Ukraine's economy shrinks 10%, still better than expected

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Kiev (AFP)

Ukraine's war-torn economy shrank by nearly 10 percent in 2015 as its financial sector imploded and consumer demand shrivelled up due to the currency's steep drop against the dollar.

The state statistics service's final adjusted figure of a 9.9 percent contraction in the gross domestic product was an improvement on the 10.4 percent drop forecast by the government at the end of last year.

But it was worse than the drop of nearly seven percent recorded in 2014 -- the year the former Soviet country erupted in chaos that resulted in the downfall of its Russian-backed leadership and the outbreak of an eastern separatist revolt.

The east European nation of slightly over 40 million has now been riven by a 23-month conflict that has claimed the lives of nearly 9,200 people and effectively paralysed its industrial heartland.

A nearly two-month-long political crisis that saw the prime minister survive a no confidence vote and Ukraine's stalled fight against corruption have delayed the disbursement of crucial IMF aid.

Ukraine has further been hurt by a trade war with Russia and a drop in the global price of its wheat and steel exports.

But Ukraine's central bank still expects the economy to expand by 1.1 percent this year.

Ukraine's Finance Minister Natalie Jaresko said last week that she was downgrading her government's initial two-percent growth projection to one percent because of persistent problems in the agricultural and metals manufacturing sectors.

The state statistics service's breakdown of data showed the largest drops affecting consumer spending and banks.

It said that "financial and insurance activity" had contracted by 27.7 percent while wholesale and retail trade fell by 16.8 percent.

It also reported a 24.4 percent drop in the general services sector.

Activity in country's health services picked up by 2.3 percent -- the only part of the economy to record any growth.

Ukraine's currency, the hryvnia, has lost about two third of its value against the dollar between the start of 2014 and the end of last year.