Ukraine’s GDP Grows for 11th Straight Quarter with 2.8% YoY Rise in 3Q18

December 26, 2018
 

News
The Ukrainian economy demonstrated its 11th straight quarter of growth with 3Q18 GDP rising by 2.8% YoY (after 3.8% growth for 2Q18), according to the preliminary estimate from the State Statistics Committee released last week. The data also showed that the country’s seasonally-adjusted GDP rose by 0.4% on a quarterly basis in the period. The country’s economy last contracted (on a year-over-year basis) in 4Q15 amid the detrimental effects of lost territory and lost industrial capacity due to the Donbass war.


Commentary
The 3Q GDP rise of 2.8% YoY is somewhat lower than expected, but nonetheless confirms that the country’s economy is performing reasonably well. We continue to expect full-year 2018 growth at 3.0%, as we view the National Bank’s forecast of 3.4% as too optimistic. It is unlikely that Ukraine’s 4Q18 GDP figure will exceed 3.5%, as neither industrial production or retail sales showed a notable acceleration in November. The industrial production index is up by a modest 1.6% YoY year-to-date through November, and it declined by 0.9% YoY in November alone. On the other hand, national agricultural production in Ukraine remained a bright spot for the economy, with the agro output index increasing by a solid 8.2% YoY in 11M18. We now see a situation where Ukraine could become a notable beneficiary of the recent sharp drop in global oil prices, as the country pays approximately USD 1.1bn every month for fuel and energy imports. Lower oil prices should improve Ukraine’s trade balance and also boost consumer sentiment. Ukraine’s current account deficit amounted to USD 4.57bn in 10M18, increasing by 2.6x from the deficit of USD 1.74bn seen in  the corresponding period in 2017 (when oil prices were lower). As a result, Ukraine’s overall balance of payments was a deficit of USD 254mn in 10M18 after a surplus of USD 2.07bn in 10M17.   


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