- Industrial production grew by 2.4% in 2016
The UX index decreased by 0.2% on Yesterday, while the PFTS index was up by 2.3% (in UAH term). The WIG-Ukraine index increased by 0.1%. On the interbank exchange market, the USD/UAH was down by 0.1% to UAH 27.35 (mid price), according to Bloomberg. The official exchange rate reported by the NBU was UAH 27.33.
Industrial production grew by 2.4% in 2016
Industrial production increased by 4.5% y/y in December of 2016, accelerating from 3.7% y/y growth a month earlier, according to the State Statistics Service. Growth in manufacturing accelerated to 4.6% y/y in December, up from 3.9% y/y in November, while energy generation and distribution grew by 10.4% y/y jumping from a 3.5% y/y growth in November. Meanwhile, a substantial slowing of the growth rate to 0.6% y/y is reported in mining in December, after a strong 3.3% y/y increase over the previous month. A further contraction in oil and gas extraction (-0.2% y/y) and iron ore production (-0.5% y/y) undermined growth in mining. Meanwhile, manufacturing gained in December mostly from a strong 15.1% y/y increase in food processing, together with 3.6% y/y expansion in textile, 3.3% y/y in coke and petroleum, and 2.1% y/y in machinery. On aggregate, industrial production increased by 2.4% y/y in 2016, the first time returning to the positive zone since 2012. Mining output declined by 0.3% y/y, as a further decline in oil and gas (-2.6% y/y) and iron ore (-2.1% y/y) extraction offset a 4.8% y/y expansion in coal output. Energy generation and distribution expanded by 2.6% y/y. Manufacturing led industrial growth, marking a 3.5% y/y increase, thanks to coke and petroleum (+8.1% y/y), plastics and non-metallic minerals (+6.5% y/y), metal (+5.9% y/y), food (+3.9%), and drug production (+3.9% y/y). Meanwhile, Ukraine’s GDP grew by about 1.8% in 2016, and is expected to grow by 3% in 2017, Deputy Economic Minister Oksana Markarova reported on January 23, 2016 at an investment conference dedicated to regional development in Ukraine.
The yearly industrial results exceeded all expectations, considering the persisting military conflict in the core industrial region of the country, on backdrop of unsupportive external environment. The country’s industrial development benefitted from global price improvement on the country’s iron ore and metal export, from low crude oil prices, as well as from the strong agricultural results of the year. Meanwhile, the extracting industries continued suffering from loss of assets in the occupied territories. The yearly results have underlined some industries, which started playing key role in the country’s industrial development, namely food processing, pharmaceutical, electronic and optical industries. The political emphasis on energy security and sovereignty, on top of increasing demand for energy associated with the economic recovery, should continue favoring the energy sector. In the meantime, we expect machinery, together with the construction-related sectors, to gain momentum nurtured by strategic investments in infrastructure and transport, as well as in the defense industry, on background of deepening integration into the European economy.