Ukraine C/A deficit swells to USD 0.6 bln in July

Ukraine’s current account (C/A) deficit swelled to USD
609 mln in July, from USD 407 mln in June, due to the widening trade deficit,
the National Bank of Ukraine (NBU) reported on Aug. 29. The trade deficit
enlarged to USD 1.4 bln from USD 1.2 bln in the previous month. The primary
income surplus amounted to USD 478 mln (vs. USD 491 mln in June), while the
secondary income surplus was USD 303 mln (vs. USD 264 mln in June).

 

In 7M19, the C/A deficit amounted to USD 864 mln (vs.
a deficit of USD 1.6 bln in 7M18).

 

In July, the trade deficit in the goods balance
enlarged to USD 1.5 bln from USD 1.3 bln in June. Goods exports jumped 20.3%
yoy to USD 4.0 bln (vs. a 5.2% yoy decline in June), while goods imports
accelerated 9.6% yoy to USD 5.5 bln growth (from 6.3% yoy growth in June). The
surge in export growth was mostly led by growth in food exports of 36.5% yoy
(vs. 3.0% yoy growth in June).

 

In addition, metal exports increased 1.2% yoy (vs. a 21.9%
plunge in June). Exports of mineral products accelerated to 37.6% yoy from
19.4% yoy in the previous month. On top of that, machinery exports swelled to
45.1% yoy growth from 5.6% yoy in June.

 

The accelerated growth of goods imports was mostly due
to the surge in machinery imports of 36.0% yoy (vs. 28.3% yoy growth in June).
Meanwhile, mineral product imports declined 9.6% yoy (vs. a 11.2% yoy decline
in June).

 

The financial account surplus enlarged to USD 1.9 bln
from USD 1.6 bln in June. In particular, July’s balance of payments reflected
receipts from the Eurobond placements by Ukrainian Railway for USD 0.5 bln
on July 2 and by Naftogaz for USD 1 bln on July 12.

 

In July, the surplus of Ukraine’s balance of payments
amounted to USD 1.3 bln (vs. USD 1.2 bln in June). In 7M19, the balance of
payments surplus amounted to USD 2.0 bln (vs. a USD 137 mln surplus in 7M18).

 

Evgeniya Akhtyrko: The C/A
deficit growth in July was moderate due to the surge in agricultural exports.
Meanwhile, July’s volume of goods imports was the highest in the last nine
months. Through the year end, import growth will be supported by high
investment demand, causing a high volume of exported machinery. At the same
time, the common month-to-month swings in agricultural exports might prevent
consistent growth in goods exports.

 

We project the C/A deficit to grow to USD 5.4 bln
in 2019 (vs. USD 4.3 bln in 2018) due to the growing trade deficit.