Ukraine Country Report Apr21 - April, 2021

April 4, 2021

Ukraine’s economy continues its strong post-Covid recovery in February, albeit remaining in the red. Although the economic indicators for 1Q21 will likely be sluggish, they should improve substantially in 2Q21. The slump in retail sales, industrial output and agriculture in 2Q20 stemming from the lockdown and drop in global demand has set a low base for 2Q21. This effect will gradually fade away in 2H21, so analysts expect GDP to recover by 4% this year following last year's 4% drop.

Although industrial output worsened to -4.6% y/y from 4.0% in January, this was attributable to seasonal and calendar effects (the low base from 2020, which was a leap year).

After seasonal and calendar adjustments, industrial output edged up 0.4% m/m in February. Retail sales growth, dampened by the high base of the previous year, accelerated to 5.6% y/y in February following 3.5% growth in January. Agriculture contracted 6.5% in February versus a 5.7% drop in January.

The NBU said in a major online press release that “the 2020 GDP fall (by 4.2%) turned out to be less pronounced than expected at the onset of the coronavirus crisis (by 6%). The adverse impact of the stricter quarantine restrictions imposed in January on the economy was only temporary. Business sentiment improved significantly after the January lockdown was lifted. In February, industrial companies reported positive expectations of their business performance, for the first time in the last four months. The expectations of the trade and services sectors almost reached the equilibrium level. The global economy has also rebounded on the back of the rolling out of vaccination campaigns and large-scale stimulus programs.”

Officials project 4.6% growth in 2021. Ukraine’s economy peaked in 2013 with a GDP of over $183bn and has yet to recover to this level in the past 7 years. The Deputy Head of the Office of the President of Ukraine Yulia Svyrydenko expects GDP growth by 5.1% in 2021. "But we need at least $3bn of foreign investment per year for annual growth of 1-2% of GDP," she said.

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