Ukraine central bank warns of steep hit from trade blockade

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KIEV: A trade blockade imposed by Kiev on the rebel-held eastern regions of the country will take a heavy toll on the Ukraine’s economic recovery, the central bank said Tuesday.

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The bank warned that it now expects GDP to grow 1.9 percent this year, down from its previous forecast of 2.8 percent, after an estimated 1.8 percent growth in 2016.

The pro-Western leadership in Kiev this month halted trade with the Russian-backed insurgents it has been battling since 2014, after rebels seized dozens of Ukrainian-owned businesses on their territory in response to a trade blockade by nationalist protesters.

The blockade, which has angered both sides, has hit key industries including coal production and raised the risk of power outages.

It also prompted the International Monetary Fund to suspend approval of a new $1 billion loan payment for the cash-strapped nation, part of a $17.5 billion loan program first agreed in 2015.

Ukraine’s central bank said the blockade would depress metal exports from the eastern regions, while coal imports would increase.

It now expects Ukraine’s current account deficit to reach $4.3 billion (4.0 billion euros) this year, compared with a previous estimate of $3.4 billion.

The country is struggling to revive its economy after it shrank nearly 15 percent as war raged in 2014 and 2015.

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