Ukraine GDP grows 1.3% in 2Q16

Ukraine’s GDP grew 1.3% yoy in 2Q16 after 0.1% yoy growth in 1Q16, according to state statistics released on Aug. 15. The Cabinet of Ministers projects 2.0% yoy GDP growth this year, while the IMF anticipates 1.5% GDP growth.

Alexander Paraschiy: The 2Q16 GDP increase was somewhat stronger than we expected, owing to delayed natural gas imports that improved external accounts in 2Q16 with subsequently stronger net exports. Given that external demand is not likely to recover in the near future, we do not expect much better real sector performance in 2H16. At the same time, we anticipate a substantial worsening of trade balance through the autumn months on the back of strengthened energy imports. Only the grain harvest, which is expected to grow by at least 5% yoy, is expected to underpin GDP growth in 2H16. Against this backdrop, we do not see the 2Q16 numbers as evidence for further acceleration and we are keeping our GDP forecast unchanged at 0.9% yoy growth for 2016.