Ukraine GDP grows 2.3% in 2016, state statistics report

Ukraine’s real GDP grew 2.3% yoy in 2016 owing to booming investments in fixed assets (20.1% yoy growth) and reviving private consumption (1.8% yoy), the State Statistics Service reported on March 21. Nominal GDP reached UAH 2,383 bln. Government consumption was flat year-on-year. Contribution of net exports was negative (-5.2pp): real exports fell 1.1% yoy while real imports increased 8.5% yoy.

Alexander Paraschiy: The 2016 GDP growth is in line with our February estimates and much better than our initial expectations a year ago (0.6% yoy). There were two surprises during the year: (a) local investments grew in the double-digits amid scarce FDI and (b) inventory grew dramatically on the back of a strong grain harvest, rising 9.7% yoy to 66.0 mmt in 2016. Otherwise, all other core tendencies were in line with our initial expectations.

For 2017, we expect economic growth to slow down a bit. We see at least two reasons for that. Firstly, the effect of the low comparative base will be fading away. Secondly, the economy will experience an adjustment for the government’s trade blockade of eastern Donbas (the central bank revised its growth projections down to 1.9% yoy from 2.8% yoy, estimated previously). 

What’s more, we still anticipate a metal price rollback in 2H17. Since we did not consider the trade blockade initially, we are adjusting our 2017 forecast slightly to 1.9% yoy from 2.1% yoy estimated previously.