Ukraine industry falls 21% in March

Industrial output fell 21.1% yoy in March, which is slightly better than the previous month (-22.5% yoy), UkrStat reported on April 20. Metal production and machinery have deepened their decline to -31.0% yoy (vs. -27.6% yoy in February) and -22.7% yoy (-21.7% yoy), respectively.  At the same time, chemical production (-22.5% yoy vs. -24.2% in February) slightly improved as did mining (-28.5% yoy vs. -29.0% yoy) and utilities (-12.0% yoy vs. -18.9% yoy).

According to UkrStat, industrial output in the Donetsk oblast improved somewhat to -49.4% yoy (-59.4% yoy in February) while in Luhansk oblast the industry decline was almost unchanged at 90.0% yoy (-89.0% yoy for the prior month).

Alexander Paraschiy: A high comparative base, broken connections with part of the country, and an aggravated economic situation at the regional level (due to the economic problems of Russia) are the main factors of industry decline at the start of the year.  Risk of escalation in the east is still a dominant factor. However, declining rates of industrial output will definitely start slowing down in July as the “occupied Donbas” effect will have faded out by that time (the Russian assault started in July 2014). At the same time, we have no guarantee that by 2H15 the Ukrainian industry will be compensated by the EU markets for the losses occurred from broken trade relations with the east. So far, for 2H15 we project a near 5.0% industry decline with industrial output falling 14.6% yoy for the total 2015.