Ukraine industry drops 1.7% yoy in February

Ukraine’s industrial output dropped 4.6% yoy in February (-1.7% yoy when adjusted for number of calendar days) and followed 5.6% yoy growth in January, the State Statistics Service reported on March 23. The drop was owed to decline in mining (-11.5% yoy, not adjusted for number of days) and metals (-4.3% yoy). Machinery and chemicals also fell by 1.4% yoy and 0.8% yoy, respectively.  Only utilities grew 1.8% yoy.

On a regional basis, the strongest declines were in war-torn Luhansk (-29.0% yoy), Zakarpattia (-10.2% yoy) and war-torn Donetsk (-10.1% yoy).

Alexander Paraschiy: The high comparative base and trade blockade of Donetsk and Luhansk (collectively known as Donbas) were the key factors of industrial decline last month. The contraction in industry is disappointing but we do not expect the tendency to worsen. We expect businesses affected by the trade blockade to have created alternative production chains already in March – April. 

The Ukrainian economy will keep experiencing the adverse effects of halted trading with Donbas but industial performance should recover gradually from this shock through the year. In light of the February drop, we have lowered our 2017 industry growth forecast to 1.5% yoy from 1.8% yoy estimated previously.