Ukraine economic growth accelerates to 3.6% y/y in April-June

Ukraine economic growth accelerates to 3.6% y/y in April-June
Ukraine's GDP grew by 3.6% year-on-year in April-June, following a 3.1% y/y growth in January-March
By bne IntelliNews August 15, 2018

Ukraine's GDP grew by 3.6% year-on-year in April-June, following a 3.1% y/y growth in January-March, the Ukrstat state statistics service reported on August 14.

The country's economic growth both in the first and the second quarters of 2017 taking into account the seasonal factor stood at 0.9% y/y.

"The economy of Ukraine has been growing for 10 consecutive quarters," Interfax news agency quoted Ukrstat's statement released the same day. "An increase in commodity exports has become one of the factors of growth. In the first half of the year, this indicator grew by 12.7% y/y."

The National Bank of Ukraine (NBU) has revised the nation's 2019 GDP growth forecast to 2.5% year-on-year (vs 2.9% y/y in the previous forecast), the regulator said in a statement published on July 10.

According to Ukrstat state statistics service, the country’s real GDP rose by 3.1% y/y in January-March, or 0.9% quarter-on-quarter on a seasonally adjusted basis.

In July, the National Bank of Ukraine (NBU) has revised the nation's 2019 GDP growth forecast to 2.5% y/y (vs 2.9% y/y in the previous forecast).

The NBU believes that the forecast of 2018 real GDP growth of 3.4% y/y is still relevant. "Economic growth will continue to be mainly driven by private consumption, which in the current year will be fuelled by the persisting high rate of growth in real wages on the back of high migration," the statement reads. "Favourable terms of trade, a recovery in the industrial sector, together with greater access of Ukrainian exporters to foreign markets, will decrease the negative contribution of net exports to GDP."

However, in 2019, real GDP growth will stand at 2.5% y/y due to the waning effects of higher social standards, the tight monetary conditions required to bring inflation back to its target, as well as tight fiscal policy resulting from the need to repay large volumes of public debt.

In 2020, the real economy is expected to grow by 2.9% y/y. "Private consumption, additionally supported by rising remittances thanks to an increase in the number of labour migrants, will remain the main driver of economic growth in the medium-term," the NBU believes.

Meanwhile, investment growth will be restrained by businesses’ higher labour costs. However, the contribution of net exports will remain negative over the forecast horizon, as imports will satisfy a significant portion of domestic demand and capital investment needs, according to the regulator.

A key assumption of the above scenario is based on Ukraine continuing to carry out structural reforms, as provisioned in a $17.5bn support programme agreed with the International Monetary Fund (IMF) in 2015.

"These reforms are essential to delivering macro financial stability and sustainable economic growth in the long-term," the NBU believes. "Access to the official financing provided by the IMF and other international lenders will enable the government to secure financing on the international capital markets on reasonable terms."

The International Monetary Fund (IMF) retained its forecast for GDP growth in Ukraine in 2018 at 3.2% y/y, while at the same time it lowered the forecast for 2019 to 3.3% y/y from 4% y/y.

Data

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