KIEV, May 18 - Ukraine's industrial output plummeted by 32% on the year in the first quarter, while its trade deficit narrowed significantly, reflecting the impact of the global financial crisis on the country.

The industrial output decline is largely due to a sharp plunge in global demand for steel, Ukraine’s major exports commodity, as construction activity around the globe has slowed down.

Meanwhile, rapid depreciation of the hryvnia against the U.S. dollar over the past six months has cut Ukraine’s imports even more dramatically, helping to narrow foreign trade deficit.

Ukraine reported foreign trade deficit at $419.7 million in the first quarter, compared with $3.7 billion in the same period a year ago, according to the State Statistics Committee.

Ukraine’s overall exports fell 36.6% on the year to $10.41 billion in January through March, while overall imports had dropped 46.4% on the year to $10.83 billion, according to the committee.

Exports of goods and commodities dropped 39.6% on the year, reflecting weak demand for commodity worldwide, to $8.34 billion, while imports declined 48.1% on the year to $9.78 billion, the committee reported.

Ukraine has been reducing imports of natural gas dramatically this year as some of the main consumers – steelmakers – had stayed idle due to weak demand for steel.

Meanwhile, the exports of service dropped 20.3% on the year to $2.07 billion in January through March, and the imports of services declined 22.9% on the year to $1.05 billion, the committee reported.

Ukraine’s, main exports of services, such as shipment of Russian natural gas and oil to markets in the European Union, fell following a three-week shutdown in gas supplies between Russia and the EU in January.

Ukraine has been hit by the crisis harder than most countries because of the country’s heavy reliance on exports, prompting the International Monetary Fund to approve a $16.4 billion rescue package in November 2008.

Ukraine already received two installments worth $7.3 billion within the loan package and may get another $3 billion after June 15 if the government keeps budget deficit in check and successfully restructures the banking sector. (nr/ez)