Macroeconomic review of Pivdenny Bank: September results


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

Ukrstat confirmed its preliminary estimate of GDP growth in the second quarter at the level of +4.6% compared to the previous year. Key growth drivers included agriculture, construction, financial sector and trade. On the spending side, we saw high growth in household consumption and investment. On the other hand, economic growth is accompanied by an increase in demand for imported products, as a result of which the contribution of net exports to GDP growth was negative.

In August, the decline in industry deepened to -1.7% yoy (from -0.2% yoy in the previous month). The processing industry suffered the most, where there was a significant decline in the food industry, light industry and metallurgy. On the other hand, mining and energy grew.

The nominal wage increase in August was 17.4% yoy, while the real wage increase was 7.7% yoy, slowing down from +9.5% yoy in July. The slowdown in revenue growth was reflected in a decrease in the growth rate of retail trade turnover – from + 9% yoy in July to + 6.7% yoy.

In August, consumer prices fell 0.3% compared with July, as a result of which inflation slowed from 9.1% yoy to 8.8% yoy. Food prices showed a seasonal decline due to a fall in prices on fruits and vegetables. At the same time, the price of eggs went up by almost 40% per month, which was probably due to a decrease in supply. Meanwhile, the strengthening of the hryvnia contributed to lower prices for clothes, while utilities became cheaper due to lower gas prices. Fuel and oil also fell in price amid the decline of USD/UAH and the relatively stable dynamics in world oil prices.

The current account in August was reduced with a deficit of USD 0.5 billion, which is slightly lower than a month earlier (USD -0.6 billion). The growth in exports of goods slowed amid a slowdown in the growth of food exports from +36.5% yoy to +19.7% yoy (due to lower prices and a high comparison base), as well as a 16% decrease in exports of metallurgical products yoy due to a decline in production, low world prices and rising trade barriers. The growth in imports also slowed slightly – from + 9.1% yoy to + 8.2% yoy. Against the backdrop of high investment demand, imports of metallurgical products continued to grow rapidly. On the other hand, low world prices have led to a slight reduction in energy imports. The growth of foreign direct investment and real sector loans made it possible to reduce the financial account with a surplus of USD 0.6 billion, and a surplus of the balance of payments amounted to USD 0.1 billion. Thus, Ukraine’s international reserves rose to USD 22 billion, which covers 3.5 months of future imports.

Detailed macroeconomic reports are available here.