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3.1 ​Macroeconomic overview
The y/y dynamics of Ukraine's main industries improved across the board in December.
Industrial output climbed 4.8% y/y in December after a 0.3% drop in November, driven by improvement in both the mining and quarrying and the manufacturing sectors. Industrial output was still down 5.2% in 2020.
Construction output growth accelerated to 9.9% y/y in December from 9.3% in November (for 4.0% growth in 2020), retail trade growth climbed to 13.4% from 12.1% (8.4% in 2020) and growth in the agricultural sector surged to 26% from 11.3% (however, output dropped 11.5% in 2020 due to a drought in the middle of the year).
In 4Q20, industrial output contracted just 0.3% y/y versus a 7.0% drop in 9m20. Meanwhile, retail trade surged 13.5% after 5.0% growth in 9m20 despite lockdown measures, construction rebounded to 10.5% growth from a 0.6% drop and agricultural output fell just 3.7% after plunging 12.9%. This all suggests that GDP growth likely improved significantly in 4Q20, possibly even moving into positive territory after the 5.4% y/y drop in 9m20.
The strong recovery in 4Q20 has helped to offset the contraction in 9m20. While the economy still shrank last year, the decline in GDP will likely be close to 4.5%, which is better than we had expected previously. This year, we expect GDP to recover by 4%.
Dragon Capital predicts Ukraine's GDP will grow this year by 5.3%,
Tomas Fiala, the investment bank’s CEO, said in January at the European Business Association. This would bring the GDP to $171bn, “a figure comparable to 2013, although we have lost part of the country and part of the economy,” Fiala said, referring to Russia’s 2014 occupation of Crimea and half of the Donbas. Fiala, who also is EBA president, predicted the exchange rate will end this year where it started – 28 hryvnia to the dollar.
The Ministry for the Development of Economy, Trade and Agriculture of Ukraine estimates the drop in Ukraine's gross domestic product (GDP) in January-March 2021 at 3%, according to the Economic Activity Review posted on the ministry's website on January 11.
Ukraine’s economic recovery will be slower than expected, coming in the spring, the Economy Ministry predicted on January 11. Reversing an earlier prediction of economic growth in the first quarter of 2021, the Ministry now forecasts GDP shrinkage by as much as 3% y/y in the January-March period. The Ministry blamed “declining strength of most foreign trade (especially services) [and] constant fluctuations and changes in working conditions in 2020, continued restrictions associated in the fight to control the coronavirus pandemic.” According to the Ministry, Ukraine’s GDP contracted by 4.8% last year.
NBU expects Ukraine’s economy to grow 4.2% y/y in 2021. ​In 2022-2023, it will grow around 4% y/y, driven mostly by high consumption demand boosted by the public's growing income.
22​ UKRAINE Country Report​ February 2021 ​ ​www.intellinews.com