Ukraine: Agriculture to power economic growth in 2008

Publication Date	September 2008
Publisher	Concorde Capital
Product Type	Report
Pages	13
ISBN Number	not applicable
Product Code	CNC00011

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Summary

July recorded the highest real GDP growth in Ukraine since the beginning of the year. Real GDP grew 7.3% yoy in July (6.5% yoy in 7M08), propelled by a jump in agricultural output of 10.8% yoy in 7M08. The bountiful harvest pushed agriculture to offset slowing industrial growth, which ebbed to 7.3% yoy in 7M08.

Growth in fixed capital investments decreased to 8.2% yoy in 1H08. Rising prices and rigid lending suppressed investment inflows into fixed capital, particularly in the processing sector, which poses concerns of industrial output growth slackening in the mid-term.

A bounteous harvest brought Ukraine its first deflationary month since 2006. In July, the State Statistics Committee reported the first month-on-month deflation since April 2006. A seasonal increase in the supply of food products induced a 1.3% mom fall in food prices. We forecast that inflation will downshift through yearend to 21.0% yoy in December 2008.

C/A deficit squeezed in 7M08 comparing to 1Q08, egged on by a hike in global steel prices. We expect that in the next quarter grain exports will be among the main drivers further narrowing the C/A deficit.

The Verkhovna Rada is unlikely to amend the state budget this year, Minister of Finance Viktor Pynzenyk said in a conference call on August 14. If planned amendments to the budget increasing social expenditures are rejected or not brought up for vote at all, this will deliver inflation from additional upward pressure on the consumption side.

Content

Economic growth
- 1. Agriculture pushes GDP upward
- a. GDP growth by sector table
- b. Agricultural output, chg yoy - chart
- c. Contribution to real GDP growth by sector chart
- d. Investment in fixed capital by sector in 1H08 table
Prices
- 2. First deflation in two years
- a. Key inflation indicators, July 2008 - table
- b. CPI growth is being pulled down by food prices chart
- c. Historical natural gas price increases for households - chart
Monetary policy
- 3. NBU's sterilizing actions butted interest rates up
- a. NBU interventions at record high since Nov-05 chart
- b. Liquidity regulation by the NBU in 2008 chart
- c. Overnight rates, flat in July, increased in August after the NBU's sterilizing measures chart
- d. Monetary aggregates table
Currency exchange
- 4. UAH/USD 2008 yearend forecast
- a. Exchange rates, as of August 28 table
- b. UAH/USD exchange rates chart
- c. Demand for foreign currency prevails over demand for UAH in last four months of year chart
- d. Shares of currencies in Ukraines foreign trade chart
External activity
- 5. Grain exporters pick up the baton from steel producers
- a. Steel square billet, $/mt, FOB, Black sea chart
- b. Ukrainian grain exports, mln mt - chart
- c. Oil prices (URALS), USD/bbl - chart
Budget
- 6. Rada amends budget to compensate for flood damage
- 7. Consolidated budget execution, 1H08 table
- 8. Surplus in 1H does not mean surplus in a full year chart
Macro monitor
- 9. GDP by consumption in 1Q08, USD bln chart
- 10. GDP by sector in 1Q08
- 11. GDP growth and GDP per capita
- 12. Real GDP & industrial output, % yoy
- 13. Industrial output growth by sector, % yoy
- 14. Construction, retail, banking assets, % yoy
- 15. Inflation, % yoy
- 16. Real disposable income and average salary
- 17. Consolidated budget execution, UAH bln
- 18. External trade, USD bln
- 19. External trade in merchandise, 6M08
External debt
- 20. FX reserves & external public debt, USD bln
- 21. Money supply structure, UAH bln
Interbank exchange rate
- 22. Ukrainian macro indicators yearly - table
- 23. Ukrainian macro indicators quarterly- table
- 24. Ukrainian macro indicators monthly - table
- 25. International comparison - table