Macroeconomic Forecast Ukraine

July 2006 | Macroeconomic Forecasts

BMI View: Latest data indicating a surprise bounce in economic activity in May suggest a better than expected outlook in the short term. Industrial output grew by 10% y-o-y in May, from just 0.5% the previous month, representing the greatest monthly gain by far since 2004. In turn, this strong industrial performance helped drive an 8.5% y-o-y expansion in GDP, up from 3.5% in April. The authorities expect sectors such as food and textiles that are less energy-intensive and service buoyant consumer demand to drive a recovery, while the struggling steel industry has also experienced something of a pick-up in recent months. Some officials are now predicting GDP growth as high as 3-4% this year, compared with the government's established 2.8% forecast. Nevertheless, we are not ready to raise our own 2% forecast just yet, given the prevailing uncertainty relating to political outcomes and rising gas prices. Utility bills for households are set to rise sharply again as of July, while the authorities still need to agree a gas import price with Russia for Q4.

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