Ukraine economy ministry estimates 2.5% GDP growth in 1H17

The Ministry of Economy and Trade of Ukraine has
estimated 2.5% yoy GDP growth for the first half of the year, according to its
composite industrial index report released on July 26. The main factors were
construction accelerating to 24.6% yoy growth in 1H17 from 19.4% in 1Q17, and
improved organized retail trade, accelerating to 7.1% yoy growth in 1H17 from
3.0% in 1Q17. The growth occurred despite a 0.4% yoy decline in industrial
output and a 2.1% yoy drop in agricultural production.

The State Statistics Committee will announce the
official 1H17 GDP growth estimate in September. Previously, the committee
reported 2.5% yoy GDP growth in 1Q17. Also the National Bank revised its 2017
GDP forecast to 1.6% yoy growth from 1.9% yoy.

Alexander Paraschiy: We are less
optimistic about the first half than the Economy Ministry, estimating a 1.9%
yoy GDP increase in 1H17. We recognize accelerating retail trade, which closely
correlates with consumption. However, we also see a widening trade deficit in
goods (to USD 1.3 bln in 2Q17, according to customs reports, from USD 0.7 bln
in 1Q17), which means that a large part of extra demand went towards import
growth. Against this backdrop, we do not see any reason to revise our initial
forecast and we are keeping our projection at 1.9% yoy GDP growth in full-year
2017.