Ukraine: GDP contracts at fastest pace in over four years in Q2
A second estimate confirmed that the economy shrank 11.4% year-on-year in Q2, matching the preliminary release and marking the sharpest contraction since Q2 2015, as Covid-19 containment measures took their toll on activity.
On the domestic side, private consumption collapsed 10.4% in Q2, contrasting the 8.1% growth logged in Q1 and marking the worst reading in over four years. Similarly, fixed investment plummeted again, contracting 22.3% year-on-year in the second quarter (Q1: -21.4% yoy). Meanwhile, although government spending declined 1.6% in Q2, it fell at a markedly softer pace than Q1’s 9.7% drop.
On the external front, exports of goods and services plummeted 9.0%, swinging from Q1’s 0.9% expansion. In addition, imports of goods and services dropped at a significantly quicker pace of 23.4% in Q2 (Q1: -4.0% yoy).
On a seasonally-adjusted quarter-on-quarter basis, the economy contracted 9.9% in Q2, steeper than Q1’s 0.7% drop and marking the worst contraction on record.
The economy is expected to contract this year as Covid-19 weighs heavily on activity. Elevated unemployment and the possibility of a second wave of coronavirus infections, combined with the country’s limited fiscal space, cloud the outlook. The government’s capacity to meet the conditions for the IMF loan secured in June is key to the recovery ahead.