The Ukraine’s economy shrank 14.4 per cent in November, the sharpest recorded drop in the ex-Soviet state’s history, as a malaise in heavy industry spread to consumers battered by a plummeting currency.

The hryvnia currency sank to a new historic low of 12.9 to the pound on Tuesday, despite central bank intervention and the announcement of a foreign currency auction for yesterday.

The hryvnia has lost about 82 per cent of its value since September, when the global financial crisis took hold, the same percentage loss as during the 1998 crisis that wrecked Russia’s economy and spread throughout the region.

The plunge in gross domestic product was prompted by a drop in demand and prices for Ukraine’s steel and chemical exports – factories and mills have cut capacity drastically leading to a 30 per cent drop in industrial production in November.

The fall accentuated an abrupt turnaround in the economy that occurred in October and turned what were previously analysts’ worst case scenarios of four to five per cent drop in growth next year, into realistic forecasts.

Recession next year would break a cycle of growth of seven per cent on average since 2000, punctuated by rising commodity prices plus growing consumer spending and increased lending.

``The data was a bit of a shock. This underlines the difficulties not just in industrial production, but also amongst consumers who are reining in spending.’’ UniCredit analyst Dmitry Gourov said.

President Viktor Yushchenko, still at odds with his former ally Prime Minister Yulia Tymoshenko despite the reinstatement of a governing coalition last week, said worse was to come.

“The president, citing analysts forecasts, said GDP is expected to fall seven to ten per cent in the first quarter of next year,” Yushchenko’s press service said in a statement.

Data from the State Statistics Committee showed growth in January-November had slowed to 3.6 per cent, lower than both analysts’ forecasts of 4.6 per cent and the ten-month result of 5.8 per cent.

Ukraine, the world’s eighth largest steel producer, halved output in November, with rolled steel down 54 per cent and pig iron down 57 per cent. Construction has also slumped, falling 16.1 per cent in January-November, against the same period last year.