Ukraine: Second estimate confirms softer contraction in GDP in Q4
March 22, 2021
GDP fell 0.5% year-on-year in the fourth quarter of 2020, according to a second estimate. The result marked an improvement from both the preliminary estimate of a 0.7% drop and the 3.5% slide tallied in the prior quarter. All in all, however, the economy shrank 4.0% in 2020, contrasting 2019’s 2.3% rise.
The softer downturn in Q4 was largely attributed to a pickup in domestic activity: Household consumption gained steam in the quarter, growing a notable 4.9% year-on-year (Q3: +1.8% yoy), while government spending bounced back solidly, increasing 4.1% (Q3: -4.5% yoy). However, fixed investment nosedived 26.5%, deteriorating from Q3’s 25.1% fall, as business activity was likely hampered by elevated uncertainty stemming from high Covid-19 infection rates throughout the quarter.
On the external front, exports of goods and services fell at a more pronounced pace of 9.2% in year-on-year terms in Q4 (Q3: -5.0% yoy), as a flare-up in Covid-19 infections and a tightening of restrictive measures in key export markets, particularly the EU and Russia, weighed on foreign demand. Meanwhile, imports of goods and services fell 4.0%, notably above Q3’s 9.9% slide.
Lastly, on a seasonally-adjusted quarter-on-quarter basis, the economy grew 0.8 % in Q4, moderating significantly from Q3’s 8.5% jump.
Looking forward, the economy is expected to return to growth this year, as domestic and foreign demand gradually recover from the pandemic’s hit. However, much depends on the pace of vaccination efforts domestically and abroad, with the country’s notably low vaccination rate posing a key downside risk.
Commenting on the outlook for the economy, Chris Portman, senior economist at Oxford Economics, said:
“GDP is forecast to grow strongly from Q2 and is still seen at 4.6% for full-year 2021 despite a setback to industrial production in Q1 as Covid-19 cases flared up again. […] Growth is then forecast at close to 4% in 2022, dropping below 3% in 2023-24. […] Stability also depends on retention of IMF support as an assurance of continued pressure for reform if a less liberal government is voted in.”
Author: Alexandros Petropoulos,