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GDP Growth in Ukraine: up to 3.8% in 2Q

GDP growth rate in 2Q 2011 amounted 3.5-3.8% in annual terms, according to experts at the National Bank of Ukraine. Such decline in the growth rate (compared to 5.3% in 1Q) is to a greater extent due to the effect of the last year’ base of comparison. It is evidenced by the GDP decline by 0.2% (taking into account the seasonal factor) in comparison with the first quarter.

In July, economic growth remained approximately at May’s level. Growth in the index of production in basic industries (IPBI) was 9% in annual terms (9.1% in May). In the first half of the year, the IPBI was up 8.9% from the same period last year.

A consistent trend for the increased growth rate that observed from the start of the last year was replaced by deceleration. A gradual decline of the domestic consumer demand was mainly due to a slower growth of real wages: growth ratio in annual terms was 11.1% for the first quarter from 9.7% in April and 5.2% in May. Growth in retail trade turnover dropped to 13.9% in annual terms in June (17.5% in May).

An external demand remained at nearly the same level. Negative expectations due to aggravation of the financial crisis in Greece and the economic slowdown in the U.S. have led to uncertainty in world commodity markets. Indicators of production by export-oriented industries are attributable to a domestic demand and lower base of comparison last year. Gain of steel production in June was 15.3%, mechanical engineering – 15.8% per annum. Industrial production growth rate amounted to 8.9% p.a., for the first half of the year – it was 8.7%.

Internal demand has become investment oriented in recent months, as evidenced by the rapid growth of construction – 14.5% in the first half of the year from the same period last year. Capital budget expenditure went up 2.7 times for 5 months. It was a major factor for the rapid ramp up of overall construction activities.

Source: National Bank of Ukraine