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NBU Comments on Dynamics of Real GDP in 2017

23 March 2018

Press Release


Economic growth in Ukraine accelerated from 2.4% in 2016 to 2.5% in 2017. In Q4 2017, real GDP grew 2.2% yoy, as evidenced by detailed GDP data in Q4 2017 and for the whole of 2017 published by the State Statistics Service of Ukraine.


Real GDP growth outturn in 2017 was higher than the NBU’s projections, published in January 2018 Inflation report (2.1% yoy).


The economy of Ukraine has been recovering faster than expected and previously forecasted on the back of a more rapid growth in domestic consumer demand and buoyant investment activity.


      Consumer demand was the main driver of the real GDP growth in 2017, as expected. Last year, the growth of household final consumption expenditures markedly accelerated (to 7.8% yoy from 2.1% yoy in 2016) bolstered by strong real wage growth, as well as the increase in the average size of pension benefits. General government consumer spending increased 3.3% yoy after a decline of 0.5% yoy in 2016, driven, inter alia, due to rising budget expenditures on allowances and housing subsidies.


      Investment activity remained an important driver of economic growth. Gross fixed capital formation continued to expand at a fast rate (18.2% yoy) despite a slight slowdown as compared with the previous year (20.4% yoy). Unlike in 2016, last year saw capital investment growing across most business activities. Improved business expectations and financial results of enterprises contributed to buoyant investment activity , as did higher government spending on infrastructure projects.


      External environment was also supportive to growth. Exports of goods and services increased 3.5% yoy in real terms after a decline in 2016. However, the situation in the east of the country and extension of trade restrictions imposed by Russia in previous years continued to weigh on export growth (and on real GDP growth in general) . The disruption of supply and production ties with enterprises located in the non-government controlled areas led to acceleration in import growth (to 12.2% yoy from 8.7% yoy in 2016), in particular due to coal deficit in the domestic market. However, reviving domestic demand was the main contributor to import growth. As a result, contribution of net exports to real GDP growth remained negative (at 5 pp), being, although, lower than in the previous year (5.7 pp).


      Stronger domestic demand and increased trade turnover helped improve performance indicators intrade, transport and manufacturing sectors. Meanwhile, an acceleration in the construction industry and real estate activities reflecting buoyant investment activity. The service sector at large improved performance, particularly in H2. This helped offset the decline in gross value added in the agricultural sector due to lower crop yields in 2017 compared with the 2016’s record high harvest of cereals and oilseeds, as well as in the energy sector and the deepening decline in mining sector.


In 2018, economic growth is expected to accelerate, compared with the previous year, amid strengthening business expectations, forecast solid growth in real wages and looser fiscal policy. The situation in global markets in general remains largely benign as reflected in the dynamics of global commodity prices and strong growth in Ukraine’s main trading partners.


For reference, according to the January 2018 macroeconomic forecast published by the NBU, real GDP growth is projected to accelerate to 3.4% yoy. The new forecast will be published in the Inflation Report (April 2018).                  



Last modification   23.03.2018