Ukrainian economy emerges from recession with growth slowed by Covid

(Bloomberg) – Ukraine’s economy has returned to growth on a quarterly basis after two consecutive contractions, but the pace of the expansion has been slowed by the raging coronavirus pandemic.

Third-quarter gross domestic product rose 1.4% from the previous three months, following a 0.7% drop from April to June, according to preliminary data released on Monday. On an annual basis, it rose 2.4% – well below economists’ estimates – from 5.7% in the second quarter.

The Ukrainian economy has been driven by high consumption and a strong grain harvest. But high energy costs have slashed output in key industries, and a new wave of coronavirus lockdowns sparked by low vaccination rates have stifled the recovery.

  • The restrictive monetary policy of Ukraine’s central bank, which has raised interest rates four times this year and may do so again next month, is also affecting growth.
  • The central bank now expects annual economic growth of 3.1% this year, against a previous forecast of 3.8%. The pace of expansion is crucial for holders of Ukraine’s GDP warrants, which will only be paid if the advance exceeds 3%.
  • Due to a delayed harvest, “the positive impact of a record harvest on the economy will materialize later this year, causing real GDP to accelerate above 6% year-on-year in the fourth quarter,” said said Olena Bilan, chief economist at Dragon Capital.

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Christi C. Elwood