December 20, 2018
The economy lost pace in the third quarter, according to detailed GDP data released by the State Statistics Service of Ukraine on 20 December, with annual economic growth falling to 2.8% from 3.8% in the second quarter. Robust domestic demand underpinned Q3 growth, which came in slightly below the Central Bank’s expectations of a 3.1% increase.
Private consumption spearheaded the expansion, which surged 9.7% in year-on-year terms in Q3. This was the strongest increase so far this year and well above the 4.2% rise logged in the previous quarter. The third-quarter acceleration in household spending came on the back of growing wages and pensions, higher remittances inflows and elevated consumer sentiment. In addition, fixed investment also soared 9.7% on an annual basis in Q3 although decelerated from Q2’s 14.2% increase, due to weakening financial performance within companies and less optimistic business expectations. Meanwhile, public spending fell 6.7% year-on-year in Q3—the largest contraction in seven years—swinging from a 11.0% jump in Q2.
On the external front, exports plummeted in the third quarter contracting 5.2% year-on-year, compared to a marginal 0.1% yoy uptick in the previous quarter. The deterioration was largely driven by the challenging external environment, weak harvest of early crops and heightened tensions in the Azov Sea, which hit the transportation sector. Meanwhile, burgeoning consumer demand propped up import growth in Q3 which came in at 5.1% (Q2: +3.0% year-on-year). As a result, the external sector dragged markedly on the third-quarter growth, a deteriorating from a negative contribution logged in the second quarter.
On a quarter-on-quarter basis, the economy expanded a seasonally-adjusted 0.4% in the third quarter, down from the previous quarter’s 0.9% increase.
Author: Almanas Stanapedis, Economist