Ukraine GDP 3Q16 growth estimate improved to 2%

Ukraine’s 3Q16 GDP growth estimate has been revised to 2.0% yoy from 1.8% yoy reported previously, according to official statistics released on Dec. 19. Private consumption increased 5.0% yoy from 4.3% yoy in 2Q16. Government consumption recovered to 3.2% yoy growth from -2.4% yoy in the previous quarter.

Investments in fixed assets gained momentum at 24.8% yoy growth from 17.6% yoy in 2Q16. Real exports dropped 5.5% yoy in the quarter from a 6.5% yoy drop in 2Q16. Real imports surged 13.45 yoy from -0.1% yoy in the previous quarter.

The IMF anticipates 1.5% GDP growth in Ukraine in 2016 while Ukrainian authorities project 1.0% GDP growth by the year end.

Alexander Paraschiy: The economy is performing slightly better than we anticipated, with much stronger investment in fixed assets being the main reason. Partially, we can attribute the third-quarter investments surge to a low comparative base, but still a large part of this increase stems from economic recovery tendencies. In light of the updated 3Q16 numbers, we now expect nearly 1.4% yoy GDP growth for 2016 (after estimating 0.9% yoy GDP growth previously).

For 2017, we are keeping our initial forecast at 2.1% yoy for the year. Though current investments in fixed assets are impressive, we have concerns on the sustainability of this trend amid scarce foreign investment. Also, we do not expect booming private consumption, projecting close to a 5% yoy consumption increase through the year. External demand also does not look to be a reliable source of growth next year.