The Ministry of Economy estimates a drop in Ukraine’s GDP in January at 2.6–2.8%

The Ministry for Development of Economy, Trade and Agriculture of Ukraine estimates a drop in GDP in January 2021 at 2.6–2.8% y-o-y, according to the Economic Activity Review for January.

“The January lockdown resulted in a slight decrease in production of most economic operators, thus reinforcing the pessimistic sentiments in the business sector,” reads the Review.

According to the Ministry of Economy, economic activity in the industrial sector declined by 4% in general. Consequently, the same trend was recorded in other industries as well:

• mining -3%;
• steel industry -3.9%;
• processing industry -6.5%;
• mechanical engineering -9.8%;
• textile industry -15.2%.

As for the steel industry, the Ministry believes that lower performance resulted from high competition and protectionism in Ukraine’s key export markets.

The pause in investments in certain segments of the construction industry that consume steel products has an adverse impact on the domestic market of ferrous metals.

Only energy and pharmaceutics demonstrated a growth (3.2% and 21.4% respectively).

“In January, a decline in industry was caused by systemic negative factors intensified by the January lockdown. That resulted in a rundown in production, especially in the most contact-intensive industries. And while the global commodity markets are now demonstrating a better price environment, protectionism and tough competition prevent domestic producers from taking full advantage of these conditions,” suggests the Ministry of Economy.

According to the Ministry’s forecast, the negative GDP trend in Q1 2021 will continue due to the extension of the adaptive quarantine until the end of April.

“At the same time, coordinated action of the government and the National Bank aimed at further implementation of the economic reforms and business and social support measures, as well as the launch of the vaccination campaign may minimize the effect of GDP decline and help achieve better results at the end of Q1,” adds the Ministry.

As reported earlier, the Ministry of Economy expected a further decline of the gross domestic product in the first quarter of 2021 because of another lockdown imposed in January. Economic growth from April to June 2021 will exceed 7%.

Earlier, the Ministry of Economy improved its rating as regards drop of Ukraine’s GDP toward 1% in Q4 2020. The rate of decline of Ukraine’s GDP in Q3 2020 slowed down to -3.5%

This year, the Ministry expects growth of the national economy by 4.8%, and catching-up industrial growth may even climb above the mark of 5%.