ECONOMY NEWS: Ukraine GDP rises 2.5% in 1Q17

ECONOMY NEWS: Ukraine GDP rises 2.5% in 1Q17


Ukraine GDP rises 2.5% in 1Q17

Ukraine’s 1Q17 GDP rose 2.5% yoy owing to impressive growth of investments in fixed assets (20.1% yoy) and improving private consumption (2.6% yoy), the State Statistics Service reported on June 19. Government consumption also was in the black with 4.2% yoy growth. Net exports contributed negatively (-2.1pp) with real exports falling 0.4% yoy as real imports rose 2.9% yoy. Nominal GDP reached UAH 584 bln. 

Alexander Paraschiy: The economy keeps exceeding expectations. We projected 1.2% GDP growth in 1Q17 while it grew twice as fast, owing to improving investment and reviving consumption. Sharply narrowed net exports also helped a lot this time around. However, this doesn’t mean that we have higher expectations for 2017 growth, largely because of the widening trade deficit that we are already observing in 2Q17.

Private consumption will be on the rise and internal investments are likely to keep growing in the double digits. However, the external account balance promises to worsen on the back of sliding resource prices and trade blockade consequences, with a subsequent increase in negative net exports. We expect GDP growth to slow in the following quarters and we maintain our 2017 projection of 1.9% yoy growth.

Ukraine gross foreign debt inches up 0.1% in 1Q17

Ukraine’s gross external debt inched up 0.1% (USD 125 mln) to USD 113.6 bln as of April 1, 2017, the National Bank of Ukraine reported on June 19. The amount was equal to 117.9% of GDP vs. 121.8% of GDP at the end of 2016.  On the one hand, external liabilities of deposit-taking corporations shrunk by 5.7%, or USD 515 mln. On the other hand, intercompany lending rose 4.9%, or USD 425 mln, as well as central bank liabilities (by 2.5%, or USD 159 mln).

Short-term liabilities decreased 1.8% through the quarter (by USD 841 mln) to USD 46.2 bln, mainly owing to USD 2.65 bln in repayments of corporate debt.

Alexander Paraschiy: We observe that short-term trade credits have increased slightly (after three years of steady decline), which is an indication that the economy is feeling better. Still, we can hardly expect substantial private loans inflow this year. The IMF, EU and other IFIs will remain the main source of loans in the nearest future. 

Already in 2Q17, we expect gross external debt will rise by about USD 1.5 bln on the back of an IMF wire and an EU loan. By the year end, we expect gross external debt will approach the USD 120 bln mark on the heels of more wires from the IMF and other lenders.


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