EBRD warns on deeper recession threat facing Ukraine

Ukraine faces a plunge into recession this year and Russia could follow, the EBRD bank warned today as it joined other major institutions in highlighting the crisis' deep economic fallout.
The country has been riven in recent months as Russia has taken over the Crimea and demanded the country immediately pay off huge gas debts, while pro-Moscow insurgents in other regions have clashed with government troops as they push for greater autonomy from Kiev.
"The crisis in Russia and Ukraine is having a severe impact on the economies of the two countries," the European Bank for Reconstruction and Development said in a report released at its annual conference in Warsaw.

Sharply downgrading its forecasts made in January, the EBRD said it now expected Ukraine to tumble into recession in 2014 with a contraction of 7.0 per cent -- and to deliver zero growth next year.
The International Monetary Fund (IMF), which last month approved a USD 17-billion aid package for Ukraine, has forecast a 5.0-per cent contraction to the nation's economy this year.
At the start of the year, before the outbreak of the crisis, the EBRD had forecast that Ukraine's economy would grow by 1.5 per cent in 2014.

Ukraine's interim President Oleksandr Turchynov today said that Russia's hotly disputed annexation of Crimea in March had cost his country about USD 100 billion.

EBRD chief economist Erik Berglof meanwhile told a Warsaw press conference that "uncertainty (surrounding the crisis) is tremendous".
He added: "We think that the uncertainty is so high that we need to think through different scenarios" when making growth forecasts.
The EBRD was founded in 1991 to help ex-Soviet bloc countries such as Ukraine and conference host Poland make the transition to free-market economies and democracy.
Today, the bank forecast Russia's economy to post zero growth this year and expand by only 0.6 per cent in 2015, as investors place their money elsewhere.
In January, it had expected Russia to grow by 2.5 per cent in 2014 but noted that in the first quarter of this year, private-sector capital outflows reached USD 64 billion, exceeding the annual amount for the previous year.

The EBRD now warns that Russia could slip into recession this year while Ukraine may suffer an even deeper contraction, especially if Western nations slap tighter sanctions on Moscow.