Ukraine C/A deficit reaches USD 4.7 bln in 2018

Ukraine’s current account (C/A) deficit reached USD 4.7
bln in 2018, swelling from USD 2.4 bln in 2017 due to a higher trade deficit,
the National Bank of Ukraine (NBU) reported on Feb. 1. According to NBU’s
estimate, the C/A deficit amounted to 3.6% of GDP in 2018 (vs. 2.2% of GDP in
2017).

The trade deficit surged to USD 11.5 bln in 2018 from
USD 8.6 bln in 2017. In particular, goods imports increased 14.0% yoy (vs.
21.9% yoy in 2017), outpacing goods exports, which rose 9.2% yoy (vs. 18.3% yoy
growth in 2017). Meanwhile, primary income balance increased to USD 3.2 bln
from USD 2.6 bln and secondary income balance up to USD 3.7 bln from USD 3.6
bln.

In December alone, the C/A deficit swelled to USD 982
mln from USD 962 bln in November due to a decline in primary income balance to
USD 304 mln from USD 429 mln in November. The trade deficit amounted to 1.2 bln
and almost didn’t change from November. Goods exports increased 4.2% yoy in
December, slowing from 6.8% yoy growth in November. Food exports surged 17.0%
yoy amid record-high grain exports (in physical volume). At the same time,
metals exports dropped 7.3% yoy.

Meanwhile, December’s goods imports increased 1.0%
yoy. Food exports surged 27.7% yoy amid record-high grain exports (in physical
volume).  Machinery imports rose 10.3% yoy (from 23.5% yoy growth in
November). Mineral product imports declined 7.8% yoy (from 17.1% yoy growth in
November).

The financial account surplus jumped to USD 2.2 bln in
December (from USD 1.6 bln in November) reflecting a EUR 349 mln loan under the
World Bank financial guarantee and EUR 500 mln loan from the EU under the MFA
IV program. In addition, the private sector attracted USD 785 mln under short-
and long-term loans. The net inflow under trade credits increased to USD 745
mln (vs. USD 222 mln in November).

Due to the inflow under the financial account, the
surplus of the balance of payments in December jumped to USD 1.8 bln from USD
1.3 bln in November. In 2018, the surplus of the balance of payments amounted
to USD 2.9 bln (vs. a surplus of USD 2.6 bln in 2017).

Evgeniya Akhtyrko: The 2018
C/A deficit turned out to be lower than our estimate
due lower-than-expected imports in December. December’s month-to-month decline
in goods imports is not typical for Ukraine. Weaker demand for foreign currency
by exporters could partially explain the hryvnia’s appreciation at the year
end.

We expect the C/A deficit to enlarge to USD 5.6 bln
in 2019 due to the ongoing swelling of the trade deficit.