The European Bank for Reconstruction and Development (EBRD) on Thursday revised its outlook of the Ukrainian economy in 2014, expecting its gross domestic product (GDP) to decline by 9 percent.
The downward revision, from the 7 percent fall projected in May, was a result of "the disruption to production and trade, agricultural losses and a partial military mobilization," the bank said in a statement.
"The volatile security situation in Ukraine makes the forecast exceptionally uncertain," the statement said.
The bank also revised its forecast of Ukraine's GDP for 2015, projecting contraction of 3 percent instead of stagnation, attributing the downgrade to the turmoil in eastern Ukraine and the country's deteriorating trade relations with Russia.
"There are significant downside risks to the outlook stemming from protracted and intensified fighting and from further breakdown of trade linkages with Russia," the EBRD said.
Meanwhile, the bank noted that a stabilized situation in eastern Ukraine may pave the way for infrastructure rehabilitation and confidence recovery in 2015.
Last week, the Ukrainian government downgraded its outlook for economic contraction in 2014 from 5 to 6.5 percent.
The Ukrainian government announced earlier that it targeted a growth of 2 percent in 2015.
Ukraine's industrial output suffers record fall in August
Ukraine's industrial output plunged 21.4 percent year-on-year in August, marking the biggest decline since September 2009, authorities said Thursday.
The sharp drop was attributed to the ongoing unrest in the eastern regions, the country's industrial hub, which is a heartland for mining industry and metallurgy, the State Statistics Service said in a report.
In August, industrial production in the Lugansk region dipped 85 percent, while in the Donetsk region the output was down 58.7 percent from a year earlier.
Following the sharp drop, the country's mining industry saw a yearly decline of 27.4 percent. The processing industry shrank by 19.2 percent, while the electric power, gas and water industry decreased by 17.3 percent in August.
In the first eight months of 2014, Ukraine's industrial production edged down 7.8 percent year-on-year, the report said.
Last year, the country's industrial output fell 4.7 percent.