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IMF raises Ukraine 2006 economic growth estimate to 6%

Ukraine's economy will probably grow about 6% this year, the International Monetary Fund said, raising its forecast from a September projection of 5%.

The former Soviet republic will probably meet its budget goals this year, though 2007 targets are “quite challenging,” the IMF wrote in a preliminary report following a visit to the country. Government spending and “loose” credit have fueled a consumption boom that has stoked faster-than-expected economic growth, the fund said. The same conditions, combined with rising energy prices, will push consumer-price inflation above 10% by year-end, it said. “Ukraine has gone through another turbulent year, but macroeconomic outcomes for 2006 are poised to be better than expected,” the Washington-based IMF wrote in the report released today.

The nation of 47 million endured months of political stalemate after the party of President Viktor Yushchenko came in third in March elections and failed to build a coalition. In August, Yushchenko agreed to form a government with Viktor Yanukovych, the man he ousted almost two years earlier in the so-called Orange Revolution. The Washington-based IMF encouraged Ukraine to make its exchange rate more flexible to help keep the current-account deficit to within 5% of gross domestic product and limit inflation. It said the central bank should allow the hryvnia to move more fully within the announced band of between 4.95 and 5.25 per dollar. Ukraine should take advantage of the coming years without a scheduled election to adopt measures that include preparing for accession to the World Trade Organization, adopting new commercial laws and selling state assets. (Bloomberg)