Ukraine real GDP grows 2.4% yoy in 1Q17

The State Statistics Service has provisionally estimated a 2.4% yoy real GDP increase in 1Q17, according to its web-site on May 15.  Its quarter-on-quarter result (seasonally adjusted) was a decline by 0.3%.

The IMF projects 2.0% yoy GDP growth in 2017.  S&P forecasts a 1.9% yoy GDP increase in 2017.

Alexander Paraschiy: The reported 1Q17 GDP increase looks strange to us. The traditional drivers of growth – industry and agriculture – were reported in the red in 1Q17 at -0.7% yoy and -0.8% yoy, respectively. We observed positive developments only in construction (+19.4% yoy in 1Q17) and transportation (+11.9% yoy in cargo transportation in 1Q17), both of which used to make a modest contribution to economic growth.  Thus, on the supply side, it’s a big question as to what pushed GDP up. On the demand side, the main suspects  for this growth are a narrowed C/A deficit, which should have translated into positive net exports through the quarter, and the continued two-digit growth of domestic investments. At the same time, private consumption remains sluggish (retail trade grew only 3.0% yoy in 1Q17). In fact, the 1Q17 GDP result is somewhat better than we initially expected but we see a lot of risks ahead related to a potential decline in resource prices. Against this backdrop, we are keeping our initial GDP growth forecast unchanged at +1.9% yoy for 2017.