NBU estimates Ukraine GDP growth at 3.2% yoy in 2Q18

Ukraine’s GDP increased 3.2% yoy in 2Q18, the National
Bank of Ukraine (NBU) estimates in the 2Q18 inflation report published on the
NBU web site on July 19. This growth was driven by domestic consumer and
investment demand. The NBU report also cited the factor of a low comparative
base in 2Q17, when economic activities with Ukraine’s uncontrolled territories
were halted.

The central bank reiterated its forecast for GDP
growth of 3.4% yoy in 2018 and 2.9 yoy% in 2020. At the same time, it revised
downward its projection for GDP in 2019 to 2.5% yoy growth from 2.9% yoy.

The NBU improved its projection for core inflation in
2018 to 7.1% yoy (from 7.7% yoy in the previous report), while keeping
unchanged its forecast for consumer inflation at 8.9% yoy.

The inflation report also reflected the downward
revision of gross international reserves at end-2018 to USD 20.7 bln from USD
21.6 bln, which was reported earlier while announcing the increase of the NBU’s key policy rate
by 0.5pp to 17.5%.

Evgeniya Akhtyrko: The NBU is
being consistent with promoting the idea that the current tight monetary policy
will have a negative impact on economic growth in 2019. Therefore, the forecast
for GDP growth in 2019 was revised downward in line with the regulator’s
decision to hike the key policy rate last week.

So far, the NBU’s projections are based on the
assumption that Ukraine will secure the next IMF loan tranche of around USD 1.9
bln by the end of 2018. Should this fail, we are likely to see a significant
deterioration in the forecast in the NBU’s inflation report in October.