In Q1 2018, the growth of the Ukrainian economy accelerated to 3.1% yoy. Seasonally 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
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
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
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.
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