National Bank of Ukraine

NBU’s Comments on Changes in Real GDP in Q1 2018
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21 June 2018

Press Release


In Q1 2018, the growth of the Ukrainian economy accelerated to 3.1% yoySeasonally adjusted GDP growth was 0.9% qoq. This is evidenced by the detailed indicators of GDP for Q1 2018 published by the State Statistics Service of Ukraine.


The actual growth rates of real GDP in Q1 2018 exceeded the NBU’s projections published in April 2018 Inflation Report (2.3% yoy).


As in 2017, domestic demand, both consumer and investment demand, was the main driver of real GDP growth.



Investment growth has been accelerating for three quarters in a row. In particular, the growth in gross fixed capital formation increased to 17% yoy, due to businesses’ improved expectations and a further improvement in their financial performance. In contrast to 2017, investment growth was significantly less fueled by an expansion in construction, which saw a sharp fall in gross value added (GVA) growth, to 2.2% yoy. Instead, there continued to be rapid growth in investment in industries, such as the mining, metallurgical, mechanical engineering industries, as well as in the supply of electricity, gas, steam, and air conditioning, and in trade, transportation and telecommunications.




Consumer demand also increased further, backed by the rapid growth in real wages, the pension rises seen in previous periods, and improved consumer sentiment. However, the growth in the final consumption expenditures of households was slower compared with the previous quarter (5.6% yoy), as the real wage growth slowed down (10.7% yoy in Q1 2018 against 20.0% yoy in Q4 2017) due to a higher comparison base. Meanwhile, the consumer expending of the general government sector decreased (by 1.4% yoy), reflecting a rather tight fiscal policy at the start of 2018.




Exports of goods and services decreased by 9.9% yoy in Q1 2018. This was mainly driven by a drop in exports of grain and oilseeds, due to last year’s poorer harvest and a decline in the transit of energy resources.


Imports also decreased noticeably in Q1 2018 (by 5.4% yoy), mainly because of a decrease in energy import.


As a result, the negative contribution of net exports to economic growth declined (to 2.3 pp), speeding up real GDP growth compared to Q4 2017, and causing a deviation in the actual data from the NBU’s estimates.



Comparison base effects – the suspension of trade with the NGCA and the seizure of enterprises in those areas last year – revived GVA growth in the mining industry (by 2.7% yoy) and in the supply of electricity (by 2.4% yoy). The GVA of financial and insurance activities also returned to growth (by 9.7% yoy), reflecting the development of both the banking and non-banking financial sectors. The decline in the GVA of the agricultural sector slowed (to 0.5% yoy), thanks, among other things, to strong external demand, which contributed to the development of animal breeding. A gradual increase in total final consumption expenditure decelerated GVA growth in trade (to 5.8% yoy) and other services sectors, while decreasing the GVA in certain sectors (healthcare, in particular).


The National Bank of Ukraine expects a moderate acceleration in Ukraine’s economic growth in Q2 2018. Persistently high business expectations point to steady growth in investment activities. Higher household income, including rises in military pensions, wages and money transfers, will help propel further growth in consumer demand. In general, external market conditions will remain favorable. Despite there being certain price adjustments in some periods, global prices for Ukrainian primary export goods (steel, iron ore, grain) remain reasonably high, while Ukraine’s main trade partners are growing as a whole more quickly than expected.


According to the macroeconomic forecast published in April 2018, the NBU expects that real GDP growth will accelerate to 3.4% in the current year. An updated forecast will be published in the July 2018 Inflation Report.



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