In Q3 2017, Ukraine’s economy grew 2.1% yoy, down slightly from 2.3% in Q2. These figures are based on revised data of the State Statistics Service of Ukraine. Real GDP increased 0.2% qoq seasonally adjusted.
The real GDP growth rate matched the NBU estimates as published in October 2017 Inflation Report.
As expected, domestic demand was the main driver of GDP growth in Q3 2017.
Capital investment growth remained strong at 15.8% yoy, although slowing down somewhat due the effect of the last year’s high comparison base. This can be attributed to improved business expectations and solid financial results in Q3 2017.
The growth rate of final consumption expenditure accelerated (to 4.9% yoy), primarily driven by an increase in the general government sector expenditure (4.3% yoy) in light of somewhat easier fiscal policy.
Private household consumption also rose (5.4% yoy) boosted by strong real wage growth and improved consumer confidence (with the latter by large exceeding the last year’s level). At the same time, compared with the previous quarter, private consumption growth slowed driven by weaker real wage growth as inflation accelerated in Q3.
Exports resumed growth (6.9% yoy) amid favorable external conditions and high yields of selected farming crops. Specifically, the growth of export volumes of sunflower oil and fats accelerated, oilseed shipments (primarily rapeseed) abroad increased significantly, and a decline in ferrous metals exports slowed down. Furthermore, growth of gas transit volumes accelerated. Meanwhile, import growth also accelerated (to 13.2% yoy) as energy imports rose (mostly coal and petroleum products) and investment imports stayed high. As a result, the negative contribution of net exports increased.
Looking ahead, domestic investment and consumer demand will continue to play a significant role in economic growth in view of strong business expectations and accelerating real wage growth.
Additionally, external market conditions remain largely favorable as indicated by global commodity price movements and the robust pace of economic growth in major trade partners of Ukraine.
However, considering that yields of late grain crops and industrial crops were lower than anticipated, and in view of a high comparison base of the previous year, the rate of decline in agriculture in Q4 2017 may be larger than forecasted. As a result, risks to the real GDP growth forecast for 2017 (as published in October 2017 Inflation Report) have tilted slightly to the downside.