Ukraine is set to see economic growth of 2 per cent both this year and next amid a broader recovery across central and eastern Europe, according to the latest regional economic forecasts from the European Bank for Reconstruction and Development.

The lender to ex-communist Europe, former Soviet republics and parts of north Africa on Wednesday forecast growth would pick up this year across its 36 countries of operation for the first time in six years, after five years of deceleration, reports Neil Buckley in London.

It saw average growth in its region increasing from 0.5 per cent last year to 1.4 per cent this year, and 2.5 per cent in 2017, helped by recoveries in Ukraine and Russia.

The bank said macro-economic stabilisation in Ukraine had set the stage for recovery, although the 2 per cent growth seen this year and next remains modest after output shrank 6.6 per cent in 2014 and 9.9 per cent last year.

The EBRD’s Ukraine forecast is slightly higher this year than the IMF’s recent forecast of 1.5 per cent growth this year, but below the IMF’s 2.5 per cent for next year.

In Russia, the development bank foresees a second straight year of contraction this year, of 1.2 per cent, after a 3.7 per cent decline last year. But it forecast a return to growth of 1 per cent in 2017.

The recovery in Russia is set to boost growth for former Soviet neighbours, many of which remain heavily dependent on it for trade and remittances.

The bank’s central Europe and Baltic region, including Poland, Hungary, and the three Baltic republics, is seen maintaining growth of 3.1 per cent this year and next, broadly in line with last year’s 3.2 per cent.

But growth in central Europe remains driven by consumption. Hans Peter Lankes, the EBRD’s acting chief economist, warned that low investment was hindering the productivity growth that was previously the main driver of the region’s economic expansion.

“The real issue is growth and it is not strong enough to achieve convergence with more advanced economies,” he said.

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