Ukraine C/A switches to USD 0.4 bln deficit in June

Ukraine’s current account (C/A) balance switched to a
deficit of USD 432 mln in June from a surplus of USD 225 mln in May, mostly due
to a swelling trade deficit, the National Bank of Ukraine (NBU) reported on
Aug. 1. The trade deficit increased to USD 1.2 bln from USD 0.65 bln in the
previous month. The primary income surplus amounted to USD 491 mln (vs. USD 599
mln in May), while the secondary income surplus was USD 264 mln (vs. USD 277
mln in May).

In 1H19, the C/A deficit amounted to USD 221 mln (vs.
a deficit of USD 652 mln in 1H18).

In June, the trade deficit in the goods balance
enlarged to USD 1.3 bln from USD 820 mln in May. Goods exports declined 5.6%
yoy (vs 14.4% yoy growth in May), while goods imports slowed to 6.6% yoy growth
(from 8.4% yoy in May). The decline in goods exports was mostly due to a drop
in metal exports of 21.9% yoy (vs. 7.1% yoy decline in May). In addition, food
exports slowed to 3.0% yoy growth (after a 34.1% yoy surge in May).

The decline in imports of mineral products of 10.0%
yoy (vs. 5.4% yoy growth in May) was the major factor of weaker import growth
in June. In addition, food imports slowed to 2.7% yoy growth (vs. 15.4% yoy
growth in May). Meanwhile, machinery imports accelerated to 28.2% yoy (vs.
17.4% yoy growth in May) and chemical imports advanced 9.6% yoy (vs. 7.3% yoy
growth in May).

The financial account balance switched to a surplus of
USD 1.6 bln from a deficit of USD 0.98 bln in May. In particular, June’s
balance of payments reflected receipts from the placement of a seven-year Eurobond for EUR 1 bln
on June 13.

In June, Ukraine’s balance of payments switched to the
surplus of USD 1.2 bln (from a deficit of USD 750 mln in May). In 1H19, the
balance of payments surplus amounted to USD 744 mln (vs. a USD 307 mln surplus
in 1H18).

Evgeniya Akhtyrko: As we expected, the
improvement in the trade of goods in March-May was short-lived. Meanwhile, in
June, food exports weakened and were not able to offset a plunge in metal
exports. At the moment, we do not see factors improving exports, while energy
imports will pick up. So the trade deficit will continue to swell in 2H19.

We project the C/A deficit to enlarge to USD 5.5
bln in 2019 (vs. USD 4.5 bln in 2018) due to the growing trade deficit.