Reuters News Service, Kiev, Ukraine, Thursday, July 10, 2003

KIEV....(Reuters)--- Ukraine increased its forecast for gross domestic product in 2003 to 7.9 to 8 percent Wednesday from an earlier estimate of 6 percent, saying GDP would be buoyed by increased investment and healthy exports.

Anatoly Halchynsky, head of the central bank's council and economic adviser to President Leonid Kuchma, said inflation would also rise to 7.5 percent to 8 percent by the end of 2003, increasing an earlier forecast of between 6 percent and 7.2 percent.

"We agree with the government forecast that by the end of the year we will succeed in getting 7.9 percent to 8 percent GDP growth," Halchynsky said, adding that it would also be boosted by better market conditions for exports of machinery to countries formerly in the Soviet Union.

He said the rate of inflation would be spurred by a rise in bread prices in the first quarter and a sharp increase in June when market panic over an expected deficit of milling wheat forced prices for the staple up by about 20 percent.

Halchynsky also said Ukraine should enjoy further economic growth next year, with GDP growth reaching between 7 percent and 8 percent.

But analysts have warned that further economic growth in Ukraine, an ex-Soviet state situated on the fringes of an expanding European Union, could be threatened by this year's bad grain harvest, slow reform and world market uncertainty.