Macroeconomic overview of Pivdenny Bank: August results


Analysts at Pivdenny Bank prepared a brief overview of the main trends in the Ukrainian economy in August 2019:

According to preliminary estimates by Ukrstat, in the second quarter, Ukraine's economy showed record high growth over the past ten quarters (+4.6% yoy). Such dynamics significantly exceeded market expectations. For comparison, the NBU forecast growth at 3% yoy. Apparently, high yields and high consumer demand were the main drivers of growth.

In July, the dynamics of industrial production improved, but a slight slump remains (-0.2% yoy). The main reason for the decline was energy (-3.6% yoy), where electricity production dropped. In addition, decline was reported in the coke, metallurgy and consumer goods industries. On the other hand, a high yield ensured the growth of the food industry by 4.4% yoy. Meanwhile, due to the high growth of the average wage (+19.6%) in July, real wage growth accelerated to +9.5% yoy from +8.1% yoy. Given this, as well as improving consumer sentiment, trade growth was 9% yoy. It should also be noted the high growth rate of construction (+15.2% yoy) in July, in terms of both residential construction and the construction of non-residential and engineering structures, indicates an increase in consumer demand and high investment activity among enterprises.

In July, consumer prices fell 0.6% compared with June due to a seasonal decrease in food prices, a drop in clothing prices caused by the positive dynamics of the foreign exchange market, as well as a reduction in gas prices amid the corresponding dynamics of global prices. Nevertheless, due to the effect of the comparison base (in the corresponding month of the last year, prices fell more strongly), inflation accelerated slightly – from 9% yoy in June to 9.1% yoy in July.

The current account deficit in July rose to USD 0.6 billion (from USD 0.4 billion in the previous month) amid a widening foreign trade deficit. At the same time, food exports jumped 36.5% yoy (+3% yoy in June) due to a record high crop. In addition, metallurgy exports showed growth for the first time in 6 months. At the same time, high domestic demand ensured the accelerated growth of imports of engineering products from +28.3% yoy to +36% yoy and food products from + 2.7% yoy to +8.6% yoy . In July, the financial account was consolidated with a surplus of USD 1.9 billion due to non-resident demand for government bonds and the placement of Eurobonds by Naftogaz. This completely offset the current account deficit, and the balance of the payment surplus amounted to USD 1.3 billion. As a result, Ukraine’s international reserves grew to USD 21.8 billion, which ensures 3.4 months of future imports.

Detailed macroeconomic reports are available here.