Ukraine’s real GDP rose 2.5% y/y in 1Q19, or 0.3% q/q on a seasonally adjusted basis, to UAH808bn ($29.6bn), the State Statistics Service reported on June 19, revising upward its preliminary estimate of 2.2% y/y and 0.2% q/q growth. Ukraine’s economy grew 3.5% y/y in 4Q18.
Private consumption swelled 10.7% y/y in 1Q19, accelerating from 8.5% y/y growth in the previous quarter. At the same time, public consumption declined 8.3% y/y in 1Q19 (vs. a 2.4% y/y drop in 4Q18). Investment advanced 17.4% y/y in 1Q19, accelerating from 10.2% y/y growth in 4Q18. At the same time, gross accumulation of the capital plummeted 32.9% y/y (vs. 3.8% y/y decline in 4Q18) due to falling inventories.
In 1Q19, exports climbed 6.8% y/y (vs. 0.4% y/y growth in 4Q18) and outpaced imports, which grew 6.5% y/y (vs. 2.8% y/y in 4Q18). However, the contribution of net exports to GDP growth was negative as import volume exceeded export volume.
On the production side, the weaker GDP growth in 1Q19 was mostly due to slower value-added growth in agriculture (3.4% y/y in 1Q19 vs. 13.5% y/y in 4Q18), trade (1.1% y/y in 1Q19 vs. 1.6% y/y in 4Q18) and mining (0.4% y/y in 1Q19 vs. 2.6% y/y in 4Q18). The value added in manufacturing declined 1.3% y/y in 1Q19 (vs. 2.8% y/y in 4Q18). Meanwhile, the contribution of construction –, which surged 26.5% y/y (vs. 7.6% y/y in 4Q18) – to overall economic growth increased.
The GDP deflator amounted to 11.7% (vs. 13.5% in 4Q18).
“The surge in the construction sector generated a better-than-expected GDP result in 1Q19. However, swings in the performance of the construction sector are common so they cannot be viewed as a reliably consistent generator of value-added growth in the economy. Meanwhile, the decline in manufacturing – one of Ukraine’s leading production sectors – continues to dampen overall economic growth,” Evgeniya Akhtyrko of Concorde Capital said in a note. “We expect Ukraine’s GDP to increase 2.4% y/y in 2019 (vs. 3.3% y/y in 2018). The slower economic growth will be mostly due to a weaker year-end result in agriculture.”