Ukraine: Economy expands at a softer pace in Q3; outlook darkened by border tensions with Russia
November 16, 2021
A preliminary release revealed that GDP rose 2.4% year-on-year in the third quarter of 2021, slowing from Q2’s 5.4% growth which had marked a strong rebound after five consecutive quarters of declining output.
Q3’s slowdown came amid a less favorable base effect, but nevertheless surprised market analysts to the downside once again. Although a comprehensive release is not yet available, the print was largely due to slower growth in both the industrial and retail sectors.
On a seasonally-adjusted quarter-on-quarter basis, output rose 1.4% in Q3, rebounding from the 0.7% drop logged in the previous quarter.
Looking ahead, most of our analysts project GDP growth to accelerate in the final quarter of the year, but have downgraded overall growth for 2021. Meanwhile, regional tensions with neighboring Russia have reemerged after reports of military buildups at the border were made public. Although no full-scale conflict has been reported, this could further destabilize the region and thus threaten the outlook going forward.
Commenting on the third quarter’s figure, Andrew Matheny and Tadas Gedminas, analysts at Goldman Sachs, remarked:
“Overall, after today's large miss we are lowering our annual GDP forecast from +4.0% this year to +3.0% and from +3.5% to +3.3% in 2022, and we will be closely watching the detailed expenditure and supply-side breakdown for signs of whether technical versus fundamental drivers account for the downside surprise.”