Ukraine industry growth slows to 2.5% yoy in May

Ukraine’s industrial output growth slowed to 2.5% yoy
in May (compared to 3.0% yoy in April) owing to a 1.9% yoy decline in mining,
the State Statistics Service reported on June 22. Seasonally adjusted output
increased 2.2% m/m in May.

In 5M18, industrial output increased 2.6% yoy, the
same rate as in 4M18.

May manufacturing sped up to 3.2% yoy after 0.8% yoy
growth in April. Growth in machinery accelerated to 7.0% yoy (from 5.2% in
April), while chemicals surged 37.4% yoy (from 31.1% yoy in April). The food
industry picked up 0.5% yoy after a 4.1% yoy decline in April. Meanwhile, the
output in metallurgy dropped 1.2% yoy (after a 0.3% yoy growth in April).

Mining production declined 1.9% yoy after 5.6% yoy growth
in April. In particular, oil and gas production dropped 1.6% yoy, while iron
ore extraction declined 3.0% yoy. The growth rate of utilities – 8.6% yoy –
remained the same as in the previous month.

Regionally, growth was strongest in Ivano-Frankivsk (16.9%
yoy), as well as Ukrainian-controlled Donetsk (8.1% yoy) and Luhansk (8.0% yoy)
regions. Declines were steepest in Rivne (-13.9% yoy), Khmelmytskiy (-10.8%
yoy) and Odesa (-5.1% yoy) regions.

Evgeniya Akhtyrko: Ukrainian
industry is failing to maintain continuing improvement as gains in one sector
are often blurred by deterioration in another one. So far, industrial
performance is far short of our 2018 growth forecast of 4.6% yoy.

Meanwhile, our expectations of higher food
production in 2H18, which could push the overall industry result higher, are
more vague now. Dry weather this month could dash our hopes for a strong
agricultural result in 2018.