KIEV, Oct. 31 - Ukraine's economy, led by weakening exports of steel, contracted 1.3% on the year in the third quarter, dashing the government’s hopes for recovery this year.

The contraction, reported by the State Statistics Committee, reverses slow growth of 3% on the year in the second quarter and 2% growth in the first quarter.

The worsening economic outlook causes serious concerns within the government of Prime Minister Mykola Azarov that is facing weakening revenue collection and major spending cuts.