Following a slowdown in growth in September-November, Ukraine's industrial production fell in December for the first time since the meltdown of 2009, suggesting an economic crisis is now underway.
The state statistics committee revealed on January 17 that industrial production fell by 0.5% year on year in December, the first drop since October 2009. "December's statistics give official reason to talk of the start of a second wave of the economic crisis," Dragon Capital analyst Olena Bilan told Kommersant. "We were expecting this earlier, but many companies were filling inventory which delayed the onset of the drop."
Worst affected by the drop were oil and gas (-10,4%), light industry (-7%), metallurgy (-4,7%), electricity (-5.3%) and chemicals (-1,1%). Analysts expect the situation to get worse in January, and then flatten out in February, with negative growth overall for the first quarter of 2012.
The economy was still supported by a strong result in agriculture, which saw a record harvest increase production by 11.7%. Construction also performed well, with publicly-funded infrastructure projects in the run-up to the Euro 2012 football championships pushing the sector to growth of 11.1%. However both these are one-offs factors and the effects are already fading.
Erste Bank's newly released macro forecast for 2012 acknowledges the change in Ukraine's fortunes by lowering the bank's GDP growth forecast for 2012 to a mere 1%, compared to a government prognosis only a few months ago of 5-6%.
"The rising cost of debt around the world and the slowdown in European and Asian economies already had a negative impact on the Ukrainian economy," writes analyst Marian Zablotsky. "As for investments, these will stagnate, on the back of rising interest rates. Credit rates are now higher than PPI and CPI, while requirements for loan applications have also toughened," he added.
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