Ukraine GDP rose 2.5% in 1Q19, updated stats show

Ukraine’s real GDP rose 2.5% yoy in 1Q19, or 0.3% qoq
on a seasonally adjusted basis, to UAH 808 bln (USD 29.6 bln), the State
Statistics Service reported on June 19, revising upward its preliminary estimate of 2.2% yoy
and 0.2% qoq growth. Ukraine’s economy grew 3.5% yoy in 4Q18.

Private consumption swelled 10.7% yoy in 1Q19,
accelerating from 8.5% yoy growth in the previous quarter. At the same time,
public consumption declined 8.3% yoy in 1Q19 (vs. a 2.4% yoy drop in 4Q18).
Investment advanced 17.4% yoy in 1Q19, accelerating from 10.2% yoy growth in
4Q18. At the same time, gross accumulation of the capital plummeted 32.9% yoy
(vs. 3.8% yoy decline in 4Q18) due to falling inventories.

In 1Q19, exports climbed 6.8% yoy (vs. 0.4% yoy growth
in 4Q18) and outpaced imports, which grew 6.5% yoy (vs. 2.8% yoy in
4Q18).  However, the contribution of net exports to GDP growth was
negative as import volume exceeded export volume.

On the production side, the weaker GDP growth in 1Q19
was mostly due to slower value-added growth in agriculture (3.4% yoy in 1Q19
vs. 13.5% yoy in 4Q18), trade (1.1% yoy in 1Q19 vs. 1.6% yoy in 4Q18) and
mining (0.4% yoy in 1Q19 vs. 2.6% yoy in 4Q18). The value added in
manufacturing declined 1.3% yoy in 1Q19 (vs. 2.8% yoy in 4Q18). Meanwhile, the
contribution of construction – which surged 26.5% yoy (vs. 7.6% yoy in 4Q18) –
to overall economic growth increased.

The GDP deflator amounted to 11.7% (vs. 13.5% in
4Q18).

Evgeniya Akhtyrko: The surge
in the construction sector generated a better-than-expected GDP result in 1Q19.
However, swings in the performance of the construction sector are common so
they cannot be viewed as a reliably consistent generator of value-added growth
in the economy. Meanwhile, the decline in manufacturing – one of Ukraine’s
leading production sectors – continues to dampen overall economic growth.

We expect Ukraine’s GDP to increase 2.4% yoy in
2019 (vs. 3.3% yoy in 2018). The slower economic growth will be mostly due to a
weaker year-end result in agriculture.