Real GDP increases 3.5% y-o-y in 3Q10

Ukraine’s real GDP went up 3.5% y-o-y in 3Q10 or by 0.1% q-o-q (net of seasonality), according to preliminary data released yesterday by the State Statistics Committee, compared to +5.9% y-o-y in 2Q10. Mykyta Mykhaylychenko: The deceleration came in line with our expectations and happened mainly on the back of the diminishing low base effect of 2009. Stabilization on global commodities markets (and particularly the recovery of steel prices) after a jittery May-June stipulated stable external demand and contributed to the improvement of metallurgy-driven industrial production dynamics by the end of the quarter. On top of that, domestic consumer demand is demonstrating steady improvement as implied by increasing retail trade volumes in real terms (approximately +4.5% y-o-y in 3Q10 vs. approximately +0.5% y-o-y in 2Q10). As average export steel prices continue exhibiting stability while cooperation with the International Monetary Fund looks to be on track, we expect some marginal deceleration in real GDP annual growth rates in 4Q10 (under ever the increasing comparison base of end-2009) and keep our total 2010 forecast unchanged at +4.3%.