Ukraine remains in recession as GDP contracts by 1.5% y/y in Q3.

By bne IntelliNews October 30, 2013

Ukraine's economy remained in recession in Q3, as country’s GDP has contracted by 1.5% y/y, the fifth consecutive quarter of negative growth, the State Statistics Service has announced. The indicator was worse than the median estimate of 12 economists in a Bloomberg survey for 0.2% growth. In q/q terms, GDP declined by 0.4% in compliance with the season factor.

In mid-September, the State Statistics Service has worsened the estimate of GDP decline in Q2 from 1.1% to 1.3% y/y. Adjusted for the seasonal factor, GDP shrank 0.5% q/q in Q2. Nominal GDP made UAH 351.896bn in Q2. In Q1, GDP declined by 1.1% y/y. Ukraine's GDP growth in 2012 slowed to 0.2% from 5.2% in 2011.

Ukraine is struggling amid falling global demand for products such as steel, a widening current-account gap, shrinking foreign reserves and trade restrictions from Russia, its biggest export market. In addition, the country has did not manage to get a loan from the IMF, because the government continues to reject conditions including higher household energy tariffs.

In H2, the government expects the GDP growth to speed up, announced First Vice PM  Serhiy Arbuzov. The government’s experts point to a slight increase in demand for metallurgical products on foreign markets.

There are also grounds to count on a price growth for agricultural products on international markets. At the same time, the experts note that unfavorable weather conditions at the end of August and over entire September have substantially worsened agricultural indexes by results of Q3, which will have its negative effect on overall GDP during this period. However, in October, the weather has settled in general, which enables boosting of grain crops harvesting, as well as to continue sowing of winter crops. As a result of this, in the experts' opinion, it is worth expecting GDP growth in Q4 both in the agrarian sector and in the transport.

On Oct 8, the IMF has improved the GDP growth forecast to 0.4% y/y in 2013 from zero. In 2014, the GDP growth is seen at 1.5%. The fund's experts noted that Ukraine had been "in recession since mid-2012." They also believe that in 2013-2014 "activity will be held back by weak exports, political uncertainty, and tight monetary conditions in defense of an exchange rate under pressure because of the economy's twin deficits."

On Oct 7, the World Bank has worsened its forecast for Ukraine's GDP growth in 2013 from 1% to 0%. The World Bank also worsened its outlook on Ukraine's GDP growth in 2014 from 3% to 2%, and also supposes the country's GDP to shrink 1% in 2015. Nominal GDP in 2013 is predicted at UAH 1,437.1bn, in 2014 at UAH 1,502.5bn and in 2015 at UAH 1,651.0bn.

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