World Bank Predicts Ukrainian Economy Will be Among 2015's Worst Performers

The World Bank has lowered Ukraine's economic outlook and blames its worsening economic woes on the ongoing conflict in the east of the country.

The World Bank released its Ukraine Economic Update on Wednesday, in which it projected the country's GDP will fall 7.5 percent in 2015, compared to a decline of 6.8 percent in 2014, a further drop it attributed to the ongoing war in the east of the country.

"This lower forecast is mainly driven by the ongoing conflict that has complicated efforts to stabilize the economy, disrupted economic activities, and hurt confidence of both investors and consumers," wrote the bank in the press release which announced these results.

While a gradual recovery starting in 2016 is possible if the conflict abates and macroeconomic and structural reforms are implemented by the authorities, "the outlook is subject to substantial risks, tilted to the downside," as a further escalation of the conflict may deepen the nation's economic decline in 2015 and delay recovery over the next few years.

The World Bank projected Ukraine's GDP to rebound by two percent in 2016 and three percent in 2017, an improvement moderated by consumption, which is expected to remain constrained by the burden on real income of utility tariff hikes and subdued real wage and pension growth.

"Structural reforms, which are crucial to sustain international financial support and spur recovery, may be complicated by a fragile political environment, possible social resistance in the absence of strong safety nets and opposition by vested interests," wrote the bank in the report.

"Lower or delayed international financial assistance may exacerbate fiscal and balance of payment problems and put further downward pressure on the Hryvnia."

In 2014 the World Bank delivered $3 billion to Ukraine in financial aid, and in February 2015 it promised another $2 billion of lending for 2015.