Ukraine C/A surplus enlarges to USD 0.25 bln in May

Ukraine’s current account (C/A) surplus enlarged USD 249
mln in May (from USD 33 mln in April) due to an increased surplus on the
primary income balance and declining trade deficit, the National Bank of
Ukraine (NBU) reported on June 27. The primary income balance surplus enlarged
to UAH 624 mln from 477 mln in the previous month, while the trade deficit
shrank to USD 648 mln from USD 702 mln.

In 5M19, the C/A surplus amounted to USD 257 mln (vs.
a deficit of USD 526 mln in 5M18).

In May, the deficit of trade in the goods balance
shrank to USD 820 mln from USD 876 mln in April. Goods exports accelerated to
13.9% yoy growth (from 2.0% yoy in April), while goods imports slowed to 8.0%
yoy growth (from 12.8% yoy in April). The advancement in goods exports was
mostly due to a surge in food exports, which increased 34.1% yoy (vs. 8.1% yoy
growth in April). In addition, exports of mineral products jumped 40.6% yoy
(vs. 31.5% yoy growth in April). Meanwhile, metals exports declined 7.1% yoy
(vs. a 13.5% decline in April). Machinery exports slowed to 4.9% yoy growth
(from 8.3% yoy growth in April).

The slower growth of goods imports was mostly due to
weaker growth imports of mineral products and chemicals. In particular, imports
of mineral products slowed to 4.3% yoy growth (from 22.5% yoy in April), while
chemical imports decelerated to 8.0% yoy growth (from 16.7% yoy growth in
April). At the same time, machinery imports accelerated to 17.5% yoy growth
(from 7.5% yoy growth in April).

The financial account deficit swelled to USD 1.0 bln
from USD 79 mln in April. The deficit enlargement was mostly due to the redemption of a USD 1 bln issue of U.S.-guaranteed bonds
on May 16. As a result, the foreign currency outflow under portfolio investment
amounted to USD 776 mln (vs. USD 190 mln inflow in April). In addition, the net
currency outflow under foreign direct investment decreased to USD 70 mln (from
USD 290 mln in April).

In May, the deficit of Ukraine’s balance of payments
enlarged to USD 750 mln (from USD 45 mln in April). In 5M19, the balance of
payments deficit amounted to USD 466 mln (vs. a USD 284 surplus in 5M18).

Evgeniya Akhtyrko: Some
improvement in trade in goods is not likely to be sustainable as the effect of
food export growth is likely to fade away in the nearest months as the stock of
last year’s record-high grain exports dries out. In addition, there are no
signs of improvement in metal exports, which are the second-largest among
Ukraine’s total goods exports. At the same time, energy imports will pick up in
the second half of the year.

We expect 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.