According to a preliminary estimate from the Ukrainian State Statistics Committee, GDP in the second quarter of the year grew by 3.8% in annual terms. This rate marks easing from the first-quarter increase of 5.3% year-on-year (y/y). In quarter-on-quarter (q/q) terms and adjusted for seasonal variation, the economy expanded 0.5%. No breakdown of growth components was provided with the first estimate. In the first quarter, private consumption spending had been the key growth driver (seeUkraine: 1 July 2011:).

Significance:The provisional estimate of Ukraine's economic growth in the second quarter comes somewhat below our expectations, while still well fairly fitting our overall view of the economy, in that we saw the recovery lacking momentum.

The outlook for the coming quarters is fairly muted, with no signs having emerged in support of a broad-based, sustained recovery. In fact, the latest industrial data have confirmed that easing external economic demand has already had a suppressing impact on manufacturing output growth, and this is likely to have a further negative effect on exports in the third quarter (seeUkraine: 15 July 2011:). On the other hand, a strong harvest should support exports.

Meanwhile, we expect some pick-up in investment during the rest of the year, but upward momentum is likely to remain very modest; investment growth will be held back by weakness of bank lending and the general uncertainty of the overall outlook, in addition to the typically poor investment climate.

lexisnexis.com