Double-digit recession on cards for Ukraine

The first quarter of 2015 for Ukraine pointed to further deepening of recession, with real GDP down by 17.2% y/y. The Ukrainian economy has entered its second year of recession. 

On the production side, all sectors posted double-digit declines in Q1 2015. Mining and quarrying fell  by 29.6% y/y, industrial production contracted  by 25.6%. Supply constraints affected exports, which fell by 35% y/y in Q1 2015. The agriculture sector is contracting at a slower pace. Over the first five months of 2015, agricultural output contracted by 5.4% yoy. The construction sector shows the deepest contraction among key sectors.

On the expenditure side, consumer spending plunged by 20.7%, the contraction in retail sales accelerated to 24.7% and fixed capital investment contracted by 25.1% in Q1 2015. Conversely, government consumption increased by 5% y/y in Q1.

On the revenue side, real wages contracted by 22.5% y/y over the first five months of the year. Corporates made an aggregate loss of UAH354bn, and only 53% of the total big and mid-sized enterprises generated profits over the first five months of the year. 

"Prospects are negative for both consumption and investment. Moreover, the drop in revenues will seriously affect the state's tax revenues in the coming quarters, further hampering the government's capacity to support domestic demand", says BNP Paribas.