KIEV, Aug. 15 - Ukraine??™s economy expanded at a slower-then-expected pace in July, but the growth remained strong and had been mostly fueled by robust steel exports and emerging domestic demand, the government reported Tuesday.

The economy expanded 7.7% on the year in July, compared with 9.3% growth in June, the State Statistics Committee reported. The economic growth accelerated to 5.5% on the year in January through July, up from 5% on the year in the first six months.

???The economy??™s expansion continues,??? Valeriy Lytvytskiy, the chief economist at the National Bank of Ukraine, said. ???These are preliminary figures, so I believe after second quarter growth is revised, the [January-July] figure will be at 5.7%.???

The expansion suggests the economy has been basically in line with a forecast of 6% on-year growth in 2006 as had been predicted by former Prime Minister Yuriy Yekhanurov. The new government, formed by Aug. 4 and led by Prime Minister Viktor Yanukovych, is yet to announce its economic growth forecast for this year.

Meanwhile, the July growth appears to be slower-then-expected by the central bank as Lytvytskiy had been earlier predicting the expansion at 5.8% on the year in January through July.

The agriculture sector was the worst performer in the period with several major indicators, such as grain exports and livestock prices, falling that may further slow down the growth.

???The agriculture sector disappoints,??? Lytvytskiy said. ???In January through July the sector reduced the gross value added by 1.4%. For the first time since June 2004 the sector shows the decline of the value added.???

Lytvytskiy said the country??™s agriculture has been going through a serious management crisis when rapidly falling prices in livestock sector and problems with exports had been proving poor efficiency.

???This cannot be explained by the fact that the grain harvesting has been delayed by 10 days,??? Lytvytskiy said. ???Serious problems emerged with the sector management.???

The Agriculture Ministry has been led from early February 2005 through early August by Anatoliy Baranivskiy, a Socialist Party member, who has been trying to delay sector reforms. Baranivskiy was replaced by Yuriy Melnyk, a Communist Party nominee, when the new government had been formed on Aug. 4, suggesting the reforms may be further delayed, analysts said.

Meanwhile, other sectors of the Ukrainian economy, such as retail, transportation, construction, power generation and distribution, and extraction of natural resources, have been showing robust growth, according to the committee.

???The retail trade has been growing by digital figure [11%],??? Lytvytskiy said. ???The construction sector had joined the winners by growing [7.1%] over the past seven months. This is the highest level of the indicator since 2004.???

In order to maintain strong economic growth through the end of the year, Lytvytskiy said the government should not delay Ukraine??™s accession to the World Trade Organization and lift restrictions on grain exports.

The government would have to negotiate an end to Russia??™s ban on imports of Ukrainian meat and dairy products, worth up to $800 million annually, and to prevent other trade restrictions by Russia, such as debated plans to restrict imports of steel pipes.

???Also, the Energy and Fuel Ministry should clarify the issue of natural gas prices in the short-term and in the mid-term,??? Lytvytskiy said. (tl/ez)