The EIU’s Ukraine analyst gave a sobering update about the country at an editorial meeting this week.

Ukraine bank lending 11-12-09

The economy is expected to shrink by an eye-watering 17% this year, with only a modest recovery—subject to daunting downside risks—in 2010 and 2011. An election in January clouds the fiscal outlook considerably, and prospects for economic recovery rely heavily on assumptions for a rise in the global demand for steel, a key Ukrainian export.

The country’s battered banks have borne the full brunt of the downturn, as detailed in the EIU’s most recent financial services industry report [subscription required]. Banks have brought loan growth to a screeching halt this year, with a gradual, IMF-supported recovery forecast for the coming years. In dollar terms, bank loans are expected to shrink in every year through 2014, the end of the forecast period.