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Ukrstat has also improved the estimate of GDP growth in the fourth quarter of 2018 from 3/4% y/y to 3.5% y/y. According to official data, the nation's GDP grew by 2.8% y/y (0.4% q/q) in the third quarter of 2018. In March, the nation's Prime Minister Volodymyr Groysman said that the Ukrainian government forecasts the economic growth by over 3% y/y in 2019.
Ukraine's GDP growth in 2019 will slow down from 3.3% last year to 2.7% this year and 2.6% next year with the hryvnia exchange rate weakening to UAH30.5 per $1 by the end of 2019 and UAH31.5/$1 by the end of 2020, Morgan Stanley bank predicts. The bank expects that inflation in Ukraine will drop to 7% by the end of 2019 and 6.7% by the end of 2020, but will remain above the NBU target. Morgan Stanley experts believe that in combination with tighter financial conditions, this will mean that real rates will remain high, while the refinancing rate will decrease only to 16% by the end of 2019 and 14% by the end of 2020.
4.0 Real Economy 4.1 Industrial production
Ukraine's industrial output rose 2.1% y/y in March, after a 1.8% y/y fall in February, due to restored growth in manufacturing and continuing growth in mining, the State Statistics Service reported on April 23. Seasonally adjusted output increased 2.4% m/m. In 1Q19, industrial output declined 0.9% y/y.
Manufacturing output jumped 5.0% y/y in March (after a 1.5% y/y drop in February). In particular, food production advanced 7.3% y/y (vs. 0.6% increase in February) and metallurgical production surged 8.9% y/y (vs. 3.7% y/y drop in February). Meanwhile, output in machinery declined 1.5% y/y (vs. 4.3% y/y in February).
Mining output increased 1.8% y/y in March (vs 1.6% y/y growth in February). In particular, oil and natural gas output increased 5.0% y/y, and iron ore production rose 1.6% y/y. The supply of electricity and natural gas declined 8.1% y/y in March.
Regionally, growth was strongest in the Rivne (26.2% y/y), Vinnytsia (18.6% y/y) and Mykolayiv (12.2% y/y) regions. Declines were steepest in the Khmelnytskiy (-18.4% y/y), Zhytomyr (-9.5% y/y) and Kyiv (-5.6% y/y) regions.
26 UKRAINE Country Report May 2019 www.intellinews.com
