Ukraine Lifts Inflation Forecast; Economic Growth Behind Target

By Kateryna Choursina

July 5 (Bloomberg) -- Ukraine increased its forecast of inflation for 2008 and said the country's economic growth in the first half lagged behind its projection for the year.

The inflation rate will be 15.9 percent at the end of the year, more than a previous forecast of 15.3 percent, Justice Minister Mykola Onishchuk told journalists today after a government meeting to approve changes to the 2008 state budget.

Ukraine's cabinet has rejected demands by President Viktor Yushchenko to trim this year's budget deficit to tackle inflation, which was 31.1 percent in May. Yushchenko disagrees with Prime Minister Yulia Timoshenko on policies including how to fight inflation and the sale of state assets.

The country's economy grew 6.4 percent in the first half of 2008, Timoshenko said before today's meeting, which was held to ensure that the legislature adopts the 2008 budget before its summer recess, which starts on July 14. The cabinet has forecast growth of 6.8 percent in gross domestic product for the year.

Timoshenko said today that a ``significant'' amount of this year's 30.4 billion hryvnia ($6.61 billion) budget surplus will be used to develop the agricultural and energy industries, shipbuilding, aviation and the upgrading of roads.

The government will continue with planned social spending and increase financing to prepare for the Euro 2012 soccer tournament, which will be co-hosted by Ukraine, Timoshenko said.

Yushchenko had invited Timoshenko, the head of central bank and the Ukrainian parliament speaker to meet on July 7 to agree on budget changes.

To contact the reporter on this story: Kateryna Choursina in Kiev at kchoursina@bloomberg.net.
Last Updated: July 5, 2008 11:40 EDT