Ukraine’s Economic Growth Surprises

Ukraine’s Economic Growth Surprises

Ukraine’s Economic Growth Surprises

Although we have definitely felt solid improvement on the ground, these numbers still come in as a positive surprise.  Frankly we wouldn’t mind so much if things slowed down a little as we still are buying and want to buy a lot more.  Remember, Ukraine doesn’t either tick up or down slowly.  Still a lot to make up for over the last few years.

ML Morning Meeting

Chart: Ukraine – unexpected winner this year
Ukraine UX Index Up 21% YTD, despite some escalation with Russia. It is also one of the best markets this week. MSCI Ukraine is up 3% WTD

Source: ML, Bloomberg

Ukraine GDP grows 2.3% in 2016, state statistics report

Ukraine’s real GDP grew 2.3% yoy in 2016 owing to booming investments in fixed assets (20.1% yoy growth) and reviving private consumption (1.8% yoy), the State Statistics Service reported on March 21. Nominal GDP reached UAH 2,383 bln. Government consumption was flat year-on-year. Contribution of net exports was negative (-5.2pp): real exports fell 1.1% yoy while real imports increased 8.5% yoy.

Alexander Paraschiy, Concorde Capital: 2016 GDP growth is in line with our February estimates and much better than our initial expectations a year ago (0.6% yoy). There were two surprises during the year: (a) local investments grew in the double-digits amid scarce FDI and (b) inventory grew dramatically on the back of a strong grain harvest, rising 9.7% yoy to 66.0 mmt in 2016. Otherwise, all other core tendencies were in line with our initial expectations.

For 2017, we expect economic growth to slow down a bit. We see at least two reasons for that. Firstly, the effect of the low comparative base will be fading away. Secondly, the economy will experience an adjustment for the government’s trade blockade of eastern Donbas (the central bank revised its growth projections down to 1.9% yoy from 2.8% yoy, estimated previously).

What’s more, we still anticipate a metal price rollback in 2H17. Since we did not consider the trade blockade initially, we are adjusting our 2017 forecast slightly to 1.9% yoy from 2.1% yoy estimated previously.


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