Ukraine’s economic growth slowed during every quarter in 2017 to end the year with 1.8% growth in the last quarter, the State Statistics Service reported on February 14.
That compares to the last quarter of 2016 when growth was 4.5%, as the economy bounced back from a 15% contraction in 2015. However, as the year got going economic growth slowed throughout the rest of the year: Q1 was 2.5%, Q2 was 2.3%, and Q3 was 2.1%.
The full year growth figure was a bit better at 2.1%, according to the National Bank of Ukraine (NBU) and the outlook for this year is better still with the regulator forecasting 3.4% for all of 2018.
However, the fourth quarter result is disappointing as it shows Ukraine is operating at well below its potential. In a related indicator inflation has been rising, forcing the central bank to hike rates in January to 16%, which is also a growth-killer.
The fighting in the Donbas against Russian-backed rebels is weighing on growth and shaved at least 1pp off growth figures according to some estimates. In particular the disputed Donbas region is home to significant power, metal and coal industries that make up close to a quarter of Ukraine’s industrial production. Moreover, Ukraine put in poor agricultural results in 2017, despite good weather.
"[The worse than expected results were due] to a significant decline in crop production due to low yields of late grain crops and industrial crops," the regulator said in February.
The NBU said that there was an increase in production in the processing industry, particularly in machine building, chemical and metallurgical production, which almost completely compensated for the further decline in output in the mining and power generation sectors, primarily reflecting the impact from the gap in the production and logistics ties with the Donbas territories that are no longer under government control at the beginning of the year.
As reported, the NBU late January raised its forecast for GDP growth in 2018 to 3.4% from 3.2%, while lowering the forecast for 2019 to 2.9% from 3.5%.
In 2016, the Ukrainian economy grew by 2.3% after a decline of 9.8% in 2015 and 6.6% in 2014.