KYIV, Nov 13 – Ukraine’s economic growth is lagging behind other European countries and may be accelerated by cutting corruption, Goesta Ljungman, resident representative of the International Monetary Fund (IMF), said.

Ljungman said corruption is probably responsible for up 2 percentage points in lost GDP growth in Ukraine and is one of the urgent problems that must be tackled.

"If Ukraine brings down the level of corruption to average European levels, then growth would be not 3% but 5%. That would change growth potential," Ljungman said at a press conference Tuesday.

Ukraine has been seeking to accelerate growth in order to catch up with its European neighbors and to recover from massive recession in 2014-2015.

"It is better to have 3% growth than minus 10% that Ukraine had experienced in 2010. But this should be put in context. So EU experiences growth on average 4-5%, so Ukraine is growing at a lower pace than EU," Ljungman said.

Other important economic targets to watch are a balanced fiscal policy, reduction in inflation as a condition for lower interest rates, as well as an expansion of foreign direct investment (FDI).

"There is macroeconomic stability, but there is also concern on the market over what would happen if fiscal stability is lost," Ljungman said.

High inflation and interest rates – currently at 18% annualized rate - restrain domestic investment, he said.

“Obviously, under these conditions it is difficult to finance investments by borrowing from a bank,” he said, adding that way to solve this problem is to reduce inflation.

The IMF forecast that Ukraine’s consumer price increase will slow down by the end of next year to 6.2% due to tight monetary policy of the National Bank of Ukraine and a weakening of inflation expectations.

Ljungman also urged the government to improve the business climate and treat investors fairly in order to secure greater foreign direct investments.

"If Ukraine wants investors to invest money in the Ukrainian economy for 18-20 years, then they want to be sure that they will be treated fairly," he said. (om/ez)