Ukraine GDP falls 6.8% in 2014

Ukraine’s GDP fell 6.8% yoy in 2014, the Ukrainian government reported as part of its first estimates for the complete year on March 20. Nominal GDP reached UAH 1,566.7 bln, while private consumption fell 9.5% yoy. Government consumption increased 0.8% yoy, while investments in fixed assets plunged 23%. Exports fell 14.5% while imports plunged 22.1% yoy in real terms.

Alexander Paraschiy: In light of all the dramatic events Ukraine experienced last year (including the occupation of Crimea and parts of the easternmost Donetsk and Luhansk regions), we view the reported GDP decline as not that bad an outcome. To a large extent, an improvement in the trade balance prevented GDP from spiraling even further (net exports contributed +5.3 ppt to GDP growth), even amid the deep plunge in domestic demand that took away 12.1 ppt from GDP growth.

For 2015, we anticipate deep declines to continue at least in 1H15. We expected declines to bottom out in 2H15, at least due to a low comparative base (industrial output started plummeting in August 2014 after Russia directly intervened militarily in the Donetsk region). As previously, the narrowing trade deficit on the back of new devaluation waves will be preventing GDP from deeper declines. Our forecast is a 4.3% drop in GDP in 2015.