Real GDP is estimated to grow at 1.1% in 2016 due to increase in domestic demand. Real net exports is expected to make a negative contribution to economic growth as imports starts growing this year. We do not expect any shocks materialising by the end of this year.
After the Budget-2017 process started smoothly and the document was approved in the first reading in line with the legal schedule, the Government announced the initiative to rapidly increase minimum wage to UAH 3200 per month (previously planned at UAH 1600). This might result in different than currently forecasted real GDP growth in 2017 (currently at 2.7%).
We are not yet likely to change our flash estimate of real GDP growth in 2018 from 3.6%. Domestic demand is expected to be a contributor to growth, while contribution of real net exports is expected to remain negative.
