Ukraine GDP Q1 2019


Ukraine: Growth slows in Q1

May 15, 2019

Growth decelerated to 2.2% in annual terms in the first quarter of 2019, according to preliminary data released by Ukraine’s Statistical Institute on 15 May. This was down markedly from the 3.5% increase logged in Q4 2018 and marked the weakest expansion since Q4 2017.

Although the breakdown by components is not yet available, the first-quarter slowdown appears to have been largely driven by a deterioration in the industrial sector as output contracted at the sharpest rate in over three years in Q1. On a more positive note, consumption dynamics seemingly remained strong, reflected in surging retail sales which likely benefited from lower inflation and rising wages. On the external front, metrics were also upbeat in Q1, with merchandise exports accelerating marginally compared to the previous quarter.

On a quarter-on-quarter basis, the economy expanded a seasonally-adjusted 0.2% in the first quarter, down from the previous quarter’s 1.2% increase and also marking the strongest reading since Q3 2017.

Meanwhile, on the political front, President Volodymyr Zelensky called for snap parliamentary elections on 20 May. As encapsulated by Andrew Matheny, an economist at Goldman Sachs:

“President Zelensky’s decision to call snap elections is an attempt to capitalize on positive political momentum, as captured by his landslide victory in presidential elections and by the recent opinion polls. […] Holding early elections allows Zelensky to catch his adversaries unprepared to contest elections.”

Nevertheless, considerable uncertainty lingers as noted by Matheny:

“Besides fluidity in opinion polls, predicting the election outcome and potential coalition scenarios is complicated by the fact that 50% of MPs are elected in single-mandate votes (unless Zelensky succeeds in reforming the electoral system).”

The Central Bank expects growth to ease to 2.5% this year, before picking up to 2.9% in 2020. FocusEconomics panelists, meanwhile, project GDP to expand 2.7% in 2019, which is unchanged from last month’s forecast, and 2.9% in 2020.

Author:, Economist

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