A new World Bank Economic Update for Ukraine says that a weak global environment and delays in domestic policy adjustments have led to widening and unsustainable macroeconomic imbalances in 2013.

Ukraine saw a decline in economic activity in the first half of 2013, with real GDP falling by 1.1 and 1.3 percent year-on-year in the first and second quarters respectively.

In the second half of this year, the World Bank projects a slight increase in real GDP growth because of a good agricultural harvest and a low statistical base. Even with this improvement, however, given the decline in the first half of the year, the 2013 growth rate is projected to be close to 0 percent.

"Ukraine will benefit from taking steps to ensure a sustainable macroeconomic framework by lowering its fiscal deficit and adopting a flexible exchange rate policy. In addition, key structural reforms to spur private enterprise and strengthen the energy sector are needed urgently to jumpstart growth," World Bank Director for Belarus, Moldova and Ukraine Qimiao Fan said.

Stressing the urgency of reforms, the World Bank argued that a delayed adjustment will be more painful, leading to a slower recovery

"On the other hand, if the authorities move quickly to undertake key reforms, they will lay the foundation for a strong recovery," Fan said.