October 06, 2011 |
|Ukraine is gradually recovering from the 2008 crisis, although it carries a high degree of vulnerability to external demand and commodity prices. Its output is still below the level in 2007 as opposed to CIS peers. |
GDP growth is estimated to have grown by 5.3% in Q1, slowed to 3.8% in Q2 and rebounded in H2 on a strong harvest. Growth could reach 4.5% this year and slow considerably in 2012 on global demand. Higher social expenses and state investments are expected to give short-term support to domestic demand in H2 2011.
Rising imports and a likely deterioration of Ukraine’s terms of trade - defined as steel export versus energy import prices - pose a risk to Ukraine’s current account balance. It stood at 2.8% of GDP in August YTD and may reach 6% in 2012 in case the current gas contract applies. These increased exchange rate risks due to Ukraine’s external financing constraints.
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