Page 5 - UKRRptMay21

1.0 Executive summary
Ukraine’s economy contracted by 2.8% in January and February, compared to the first two months of last year, estimated the Ministry of Economic Development and Trade. Except for retail trade, all sectors were down. Consensus forecasts put Ukraine’s 2021 GDP growth at 4%. These forecasts were made before the April coronavirus lockdown in Kyiv and half of the regions. War jitters about Russia’s military threats also may dampen investment.
The IMF has updated its World Economic Outlook database in which it forecasts Ukraine’s real GDP will increase 4.0% in 2021 and about 3.4% in the next two years, but go slower than global growth of 6.0% in 2021 and 4.4% in 2022.
The economy did better than expected in 2020, largely thanks to the rapid growth in commodity prices that began in the fourth quarter (Ukraine is a big producer and exporter of steel), and wages have been rising strongly that in turn is driving consumption. With business activity improving big international retailers have begun to move in and construction is also showing the first green shoots with investment funds buying shopping malls and IKEA has launched its first store in Ukraine.
Key sectors of the Ukrainian economy improved in March, with better dynamics in industrial production, retail turnover and agricultural output. Industrial production climbed 2.1% y/y versus a 4.6% drop in February, primarily driven by manufacturing (up 2.5% versus a 6.7% drop in February). However, the economy is still only stepping off square one as in the 1Q21 industrial output contracted 2.0% year-on-year, dragged down by the negative results in the first two months. The outlook for the second quarter is much brighter.
There is some uncertainty caused by the pandemic, but Ukraine has finally started to receive deliveries of vaccines from India and China and as bne IntelliNews country report went to press another 10mn doses were promised by Pfizer that should help the process along.
April saw tensions flare again as Russia moved some 40,000 troops up to Ukraine’s border for “exercises.” The Kremlin claimed it was only reacting to Ukraine’s decision to move troops up to the line of contact in Donbas over the prior two months as part of the spring rotation in preparation of the new campaigning season, and there are some reports that Ukrainian troops were on the move to bring up heavier artillery too.
Some have speculated that this was a move by Ukrainian president Volodymyr Zelenskiy to provoke exactly the response he got from Russia as a way of pressuring the west for more aid. It's still unclear exactly what just happened, but whatever the truth, Russia’s response was overkill and designed to send a clear message to the White House that the Kremlin can, and will, make serious trouble if its demands are not taken seriously.
Zelenskiy took the opportunity of the tension to call on both the EU and Nato to finally commit themselves to Ukraine's eventual accession process to both
5 UKRAINE Country Report May 2021 www.intellinews.com