On August 14, the State Statistics Service reported that real Ukraine’s GDP in the second quarter of 2019 increased by 4.6% compared to the second quarter of 2018. We even outstripped Poland in terms of growth - the Polish economy in the second quarter increased "only" by 4.4%.
Economic miracle? Not really. More precisely, it’s not a miracle at all. Because the growth is poor and unstable.
First, GDP growth is taking place against the backdrop of the de-industrialization of the Ukrainian economy. The growth rate of industrial production in the 2nd quarter of 2019 is 3 times behind GDP growth - 1.6% versus 4.6%.
Moreover, over the past 5 years, industrial production has fallen deeper and grew more slowly than GDP.
So. the deindustrialization has a pronounced tendency.
Secondly, in June, industry showed a decline - minus 2.3%, incl. processing industry - minus 6.1% (compared to June 2018), and engineering - minus 13.3%.
The situation in industry over the past six months is very unstable - 3 months growth, 3 months fall:
- March (+ 2.1%), April (+ 5.2%) and May (+ 1.6%),
- January (-3.3%), February (-1.8%) and June (-2.3%).
Thirdly, Ukraine’s GDP growth in the second quarter (however, as in the first) is primarily ensured by:
1. Retail turnover - + 7.8% (2nd quarter of 2019 to the 2nd quarter of 2018). Due to mass labor migration, as a result of which the influx of currency into Ukraine increases and due to a staff shortage due to migration, wages are temporarily raised.
2. Agriculture - + 6.3% (2nd quarter of 2019 to the 2nd quarter of 2018). Thanks to the good weather contributing to record yields.
Fourth, with the growth of GDP, other economic indicators worsen:
Foreign direct investment continues to decline - minus 11.5% (from $ 1.1 billion in the 1st half of 2018 to $ 972 million in the 1st half of 2019);
State budget revenues are not fulfilled - minus UAH 26.5 billion, and minus unscheduled revenues from the National Bank, the state budget in the 1st half of the year received less than UAH 43.9 billion, or minus 8.2% of planned revenues;
State budget expenses are underfunded - minus 42.7 billion UAH, or minus 8.5% of planned expenses for the 1st half of 2019;
Labor migration is increasing - an indirect confirmation of this is the fact that in the first half of the year, migrant workers brought $ 6.1 billion to Ukraine, which is 15% more than in the first half of 2018;
Processing industry shows minus (-0.1% in the 1st half of the year), incl. mechanical engineering - minus 4.3%, and the production of electrical equipment - minus 26.8%.
Fifthly, the more GDP grows, the more payments to external creditors will increase (Yaresko restructuring) - in the case of 4% GDP growth, additional payments will amount to about $ 830 million, and 7% (presidential goal) - more than $ 2 billion for one year, given that the creditors "wrote off" $ 3.6 billion.