Industry loses 1.7% on trade blockade in February

UKRAINE - In Brief 24 Mar 2017 by Dmytro Boyarchuk
In February industrial output fell 4.6% y/y compared to +5.6% y/y in the prior month. Predictably, mining (-11.5% y/y) and metals (-4.3% y/y) led the decline. However, the major part of the drop was due to high comparative base: industry decline was only 1.7% y/y when adjusted for calendar days. Though the Donbas-related contraction was not that dramatic – still it was stronger than expected (we projected near zero growth through the month). Should we expect further aggravation? I think – no. February was a real shock (force majeure) for the companies preserving trade relations with occupied territories. In March it became obvious that halted trading with occupied territories is the new reality that companies should systemically adjust to. At least metal production can easily recover given that iron ore and metal plants remain on Ukrainian territories. Coal mining, apparently, will be in red through the year. Against the backdrop of February results we lowered our industrial output forecast for 2017 down to +1.2% y/y from +2.1% y/y, estimated previously.

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