Ukraine industry grows in February first time in 3.5 years

Ukraine’s industrial output surged 7.6% yoy in February compared to a 1.7% yoy decline in the prior month, according to an UkrStat report on March 22. Industrial growth adjusted for calendar days was a bit slower at 4.9% yoy during the month, according to the report. In 2M16, industrial growth reached 2.9% yoy.

The main drivers for the growth in February were metals (+14.2% yoy), mining (+10.6% yoy) and machinery (+3.9% yoy). Utilities increased only 1.6% (vs. +2.2% yoy in January) while chemicals continued falling at -8.0% yoy. Remarkably, industrial output in the Luhansk region jumped 2.5x yoy and in the Donetsk region by 26.9% yoy.

Alexander Paraschiy: This upsurge came is a real surprise, marking the first time industry grew after falling 42 consecutive months since July 2012. Now the big question is whether it’s one-off result or a real breakaway from Ukraine’s economic depression. So far we believe it’s too early to be optimistic. Global metal prices did increase, but external demand remains poor. There is some recovery potential locally due to the low comparative base (Ukraine’s industrial east is recovering its production capacities). However, in light of the trade conflict with Russia and uncertain price prospects for resources, this potential is of little comfort. So far, we are keeping our industrial output forecast at 0.7% yoy for 2016.