Ukraine: GDP growth wanes in the third quarter of 2021
A second national accounts release confirmed that economic growth softened in the third quarter, with GDP expanding 2.7% year-on-year (Q2: +5.7% yoy). Nevertheless, Q3’s result came in higher than the preliminary estimate of a 2.4% expansion.
The slowdown was broad-based, with private consumption, public spending, fixed investment and exports all softening. Household spending increased 9.0% in the third quarter, which was below the second quarter’s 17.4% expansion. Public consumption dropped at the sharpest pace since Q3 2020, contracting 0.7% (Q2: +3.1% yoy). Meanwhile, fixed investment growth eased to 14.5% in Q3, from 14.8% in the prior quarter.
On the external front, exports of goods and services fell 8.6% on an annual basis in the third quarter, which was below the second quarter’s 6.2% contraction. In addition, growth in imports of goods and services waned to 12.6% in Q3 (Q2: +21.9% yoy). As such, the external sector subtracted 11.2 percentage points from the overall result, improving from the 14.1 percentage-point deduction logged in the previous quarter.
On a seasonally-adjusted quarter-on-quarter basis, economic growth rose to 1.5% in Q3, contrasting the previous quarter’s 0.7% contraction. Q3’s reading marked the best result since Q3 2020.
Looking ahead, most of our analysts project GDP growth to have accelerated in the final quarter of the year, but have downgraded overall growth for 2021. Meanwhile, regional tensions with neighboring Russia have continued to escalate after reports of military buildups at the border were made public last month and recent talks have done little to douse the dispute. Although no full-scale conflict has been reported, any escalation could further destabilize the region and thus threaten the outlook going forward.