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In the latest economic developments from Ukraine, the growth trajectory of the country’s real Gross Domestic Product (GDP) has seen a noticeable deceleration in April 2024. The nation’s year-on-year GDP growth has slowed down to 4.1%, a reduction from the 4.8% witnessed in March, and a further dip from February’s 5% and January’s 5.2%. This slowdown is primarily attributed to the challenges faced by the Ukrainian energy system.
According to a monthly economic monitoring report from the Institute for Economic Research and Policy Consulting (IER), significant damage to the shunting generating capacity has led to widespread power outages, affecting both businesses and the general population. The limitations on power supply are expected to further decelerate GDP growth rates in the coming months.
Despite these challenges, there has been some positive development in the growth of exports and imports, enhanced by improved logistics. This improvement is a result of better utilization of the Ukrainian sea corridor—initiated unilaterally by Kiev—and enhancements in road transportation. Conversely, rail traffic experienced a decline in April, with a 5% drop month-on-month and a 29% decrease year-on-year, totaling 15.2 million tonnes.
In an analysis of the Gross Value Added (GVA) growth, the report highlights a remarkable 10% growth in the processing industry during April. Meanwhile, the extractive industry’s growth was relatively moderate, estimated at around 3%. The report credits enhanced logistics for boosting the performance in sectors such as metallurgy and iron ore mining.
The construction industry also showcased high GVA growth rates, partly fueled by the activities surrounding the building of fortifications. On the other hand, the trade sector experienced a deceleration, with growth rates slowing to 3%, influenced by a higher statistical base.
Additionally, the IER report shed light on fiscal performance, revealing that the tax and customs services exceeded revenue expectations in April. In a significant fiscal contribution, the National Bank of Ukraine (NBU) doubled its revenue transfers to the budget, signaling strong fiscal management and revenue generation amidst economic challenges.
This economic outlook follows a year where Ukraine’s GDP saw a 5.3% increase in 2023. Projections for the current year from the National Bank indicate a slowdown to 3%, while the government holds a slightly more optimistic expectation of 4.6%. The GDP growth for the first quarter of the year was recorded at 4.5% by the Economy Ministry, whereas the NBU’s assessment stood at 3.1%, illustrating a divergence in economic performance assessments.
As Ukraine navigates through these economic and logistical challenges, the focus on stabilizing and improving the energy infrastructure, alongside enhancing logistic networks for trade, appears to be critical for sustaining growth and stabilizing the economy.
