Ukrainian economy accelerated growth. In Q2 2016, real GDP grew by 1.4% y-o-y according to revised data of the State Statistics Service of Ukraine. Real GDP increased by 0.6% (when seasonal factors are disregarded) compared with Q1 2016.
Real GDP growth is somewhat lower than stated in the NBU estimates appeared in the latest Inflation Report (1.6%). It can be attributed to the impact of transportation challenges in the east of the country in the end of the quarter. They halted industrial activity, first of all, of of the mining and metallurgical complex, and worsened indicators of trucks activity. In addition, service sectors continued to recover slowly. Particularly, it took place in areas of health care and education, which among other factors was the reflection of moderate fiscal policy. Moreover, drop in financial and insurance activities slowed, however, remained significant.
Instead, agriculture demonstrated growth as expected due to early start of harvesting and high yield. Trade and building had positive results that, as assumed, reflected recovery of the domestic demand.
In general, key driver for the economic growth in Q2 became investment demand, which was supported by improved business outlook. Increase of total accumulation in the core capital accelerated to 17.6% that proved our estimates regarding key role of the investments in economic recovery in 2016. After continuous drop the growth of household consumption recovered (by 4.3% y-o-y) that was also expected against the background of its significant drop during previous periods.
Net exports resulted in negative contribution to GDP change that was untypical of this component from the beginning of 2014 (except Q1 2015). Exports drop somewhat deepened. By our estimates, physical volumes of grain exports grew in Q2, however, growth of metallurgical exports slowed and the drop in metal ore, machinery and chemical exports kept on. At the same time, fall of imports has come close to zero mostly due revival of non-energy imports and services imports (first, travel services).
In Q3, by our estimates, economic activity was affected by divergent factors. On the one hand, transportation challenge in the east of the country did not allow specific mining and smelting enterprises to load production capacities according to demand. Moreover, from the beginning of the quarter, a regular strengthening of transit restrictions imposed by Russia took place. All that affected industrial production as well as transportation and trade. On the other hand, results of harvesting indicate higher yield of agricultural crops and respectively better results of plant production. In addition, despite challenges in specific areas of economy, in Q3 business outlook continues to improve that will facilitate further growth of investment activity.
We expect that impact of positive factors will be more stable. Respectively, NBU forecast regarding real GDP growth by 1.1% in 2016 remains relevant.