KIEV, March 2 – Analysts from ING Bank have confirmed the forecast of a decline in real gross domestic product in 2016 by 1%, pointing to a predominance of political risks in the economy.

"In Ukraine, it is still all about politics," they say, according to an analytical report available to Interfax-Ukraine.

"Late last week we heard that PM [Arseniy] Yatseniuk resigned and the MinFin's [Finance Minister Natalie] Jaresko would step in. This was then denied by Yatseniuk's representatives, but this clearly indicates that the story remains fluid. Recently, President [Petro] Poroshenko urged the coalition to quickly decide on the cabinet and the PM, completely ruling out early parliamentary elections," they said in the report.

According to the document, Ukraine sentiments are driven by the messy politics and no positive drivers, but it is accepted as long as the IMF backs up the country.

The updated IMF memorandum was said to remain in the government for further discussion. ING analysts say they still believe that without resolving the political crisis the IMF program will remain at risk.

"UAH is likely set to continue weakening, and the only question is about the speed," they said.

The analysts refer to opinions expressed by their FI clients in the UK, the Netherlands and Germany late in February.

"It was a consensus view from investors that 'local politics is a mess' with no clear signs of declared reforms passing-through to the economy and country perceptions. The views varied from relatively constructive '…there are problems, but it looks OK to be in as long as the IMF/the US stays behind…' to the most negative ones of '…the West should re-assess its approach, given the dire outlook and a lack of any positive economic or/and political drivers.'"

"No clear ST [short-term] benefits from the EU Association Agreement were mentioned by some clients," the report said. (om/ez)