The European Bank for Reconstruction and Development said on Friday strong demand and favourable export markets had produced steady growth in Ukraine and pledged to boost its activity by lending in local currency.
Terence Brown, head of a delegation from the EBRD's board of directors, told a news conference his group had found a consensus during its tour of Ukraine that the economy was performing well despite some points of potential weakness. "It's driven by robust domestic demand and favourable external conditions. And we expect growth to continue in 2007," Brown said.
"There are some weak points - private external borrowing, bank lending in foreign currency - and these could be a source of economic vulnerability." He said the bank, the single largest financial investor in Ukraine, was aware of "external factors" that could affect forecasts, a reference to the economy's dependence on exports.
"But the general confirmation was that growth is steady and that we see a continuation of it and that indicators are in general positive," he said. He declined to make a specific forecast, but said he believed growth in excess of 7 percent would be posted this year. The government forecasts 6.5 percent growth in 2007.
Brown said the EBRD had clinched an agreement with Ukraine's central bank to lend money in Ukraine's hyrvnia currency - which he described as a key stage in investment in many eastern European states where the bank was active. Local officials, particularly in municipal authorities, had expressed concern over exchange risks in taking out credits for a variety of projects.
A longer-term project, he said, was to issue bonds in Ukraine, as the bank had also done in other countries. The delegation's visit, Brown said, would help elaborate a general strategy for Ukraine at meetings next week with input from local officials and the business committee to be considered.