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Ukraine's Central Bank Revises Down GDP Outlook As Blockade Hits

Empty coal wagons parked near the Metallurgical Works plant in Yenakiyeve in the Donetsk region at the end of February.

Ukraine's central bank said on March 21 that a blockade of the part of the country controlled by Russia-backed separatists will hit the country’s economy harder than previously expected.

Just two days after the International Monetary Fund postponed a review of the disbursement of a new $1 billion loan to Ukraine pending further information on the effects of the blockade, the central bank said output will rise 1.9 percent in 2017, well below an earlier forecast of 2.8 percent growth.

On March 15, Kyiv announced the suspension of all cargo traffic with separatist-held areas of eastern Ukraine, essentially putting a blockade launched by activists in January under state control.

The blockade cuts off the supply of coal and steel that industrial enterprises were still purchasing from territory controlled by Russia-backed separatists whose 3-year-old war against government forces has killed more than 9,900 people.

In response to the blockade, the separatists have seized control of some businesses registered in Ukraine and demanded they pay "taxes" to them rather than the federal authorities.

The $1 billion loan was to be the next installment of a $17.5 billion IMF package, which has been hit by repeated delays over Kyiv's inconsistent record on reforms.

Based on reporting by Reuters and AP