After a severe political and economic crisis, the economy has swung back into growth. Stabilisation of the exchange rate laid the groundwork for lower inflation. The central bank has begun to ease monetary policy, but for the moment it has not yet had an impact on lending, which continues to contract. The IMF programme has encountered new delays: it is conditioned on the implementation of pension reform, which will not be adopted before fall. The recovery is too tepid to create jobs, and numerous Ukrainians have left to seek work in neighbouring countries. Exports are picking up, and will now receive greater EU support. The difficult situation in the eastern part of Ukraine (embargo, armed conflict) hampers a veritable industrial recovery.
After a severe political and economic crisis in 2014 and 2015, Ukraine has returned to relative stability, which has enabled it to swing back into growth. Yet growth seems to be too mild to fuel a rapid catching-up movement. Ukraine reported GDP growth of 2.3% in 2016 and 2.5% year-on-year in first-quarter 2017. The national bank’s Primary Sectors Index, a leading indicator of growth, increased 2.4% year-on-year in the first five months of 2017, signalling an ongoing recovery.
Industrial activity began to recover in H2 2016, but is now being hampered by new trade barriers (see below). Industrial output contracted again, down 1% year-on-year in the first five months of 2017, after increasing 3% in 2016.
■ Inflation levels off after the exchange rate stabilises
The exchange rate has remained relatively stable since early 2016. This stabilisation has helped to anchor inflation expectations, which are declining gradually. After a record high of 48% in 2015, inflation dropped to an average of 14% in 2016. This easing trend has continued, albeit at a slower pace, since the beginning of the year, to an average of 13.5% year-on-year in the first five months of the year.
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by Anna DORBEC