GDP growth accelerated strongly to 4.6% y/y in Q2’19 from 2.5% y/y in Q1, according to the flash estimate published by the statistical office. In sequential seasonally adjusted terms GDP was up by 1.6%, strengthening from 0.3% q/q in the previous quarter. There is no breakdown yet, but the flash estimate is better than expectations and suggests that 2019 growth is likely to be above the 2.5-2.7% previously expected by the authorities and most IFIs. In mid-July the NBU revised its 2019 growth forecast up to 3%, citing strong domestic demand, improved terms of trade, and good grain harvest expectations.
The improved performance in Q2 likely reflects strong household demand as seen in the 13.6% y/y increase of retail sales in June, on the back of growing real incomes after wage and pension hikes, as well as improving sentiment. Agriculture also must have contributed strongly, while industrial output was weak with average growth of only 0.7% y/y in Q2.