Ukraine current account deficit widens to USD 125 mln in June

Ukraine’s current account (C/A) deficit widened to USD
125 mln in June, from USD 27 mln in the previous month, owing to significant
deterioration in the services balance, the National Bank of Ukraine (NBU)
reported in its provisional balance of payments on July 30. In 1H18, the C/A
deficit amounted to USD 613 mln (vs. USD 285 mln in 1H17).

 

The trade deficit enlarged to USD 822 mln in June
(from USD 771 mln in May) as the surplus in trade in services dropped to USD 1
mln in June from USD 156 mln in May. In particular, exports of services
declined 5.5% m/m, while imports increased 7.1% m/m.

 

Goods imports plunged to 9.9% yoy growth in June from
16.1% yoy growth in May. The slowdown of imports was mostly due to declining
chemicals (-1.9% yoy in June vs. 10.7% yoy growth in May) and a flat trend in
machinery (-0.1% yoy in June vs. 17.7% yoy growth in May). Meanwhile, mineral
product imports accelerated to 32.6% yoy growth (from 15.2% yoy in May) due to
fast renewal of energy imports.

 

Goods exports slowed to 11.5% yoy growth, from 13.5%
yoy in May, mostly due to chemicals (22.6% yoy growth in June vs. 49.2% yoy in
May) and machinery (1.9% yoy growth in June vs. 11.3% yoy growth in May).
Meanwhile, strong growth in metals (35.2% yoy) restrained the trade deficit.

 

In 1H18, goods imports rose 14.0% yoy while exports
grew 11.7% yoy.

 

The surplus of Ukraine’s financial and capital account
decreased to USD 148 mln in June (from USD 293 mln in the prior month), mainly because
of an outflow in the banking sector (USD 376 mln of net outflow vs. USD 64 mln
of net inflow in May) and trade credits (USD 70 mln of net outflow in June vs.
USD 412 mln of net inflow in May).

 

Meanwhile, net foreign direct investment improved to USD
462 mln in June from USD 150 mln in May. In 1H18, the balance of payments
surplus amounted to USD 23 mln.

 

Evgeniya Akhtyrko: We expect
goods imports to slow further to 11.9% yoy growth in 2018. Meanwhile, we expect
improved grain exports in 2H18 will boost goods exports enough to reach our
projected growth of 11.1% yoy in 2018. Assuming these growth rates of exports
and imports, we expect the goods trade deficit to swell to USD 10.8 bln (from
USD 4.3 bln in 1H18 and USD 9.4 bln in 2017).

 

The National Bank’s recent revision of the 2017 C/A deficit to USD 2.4 bln from USD
2.1 bln brings our 2018 C/A deficit forecast to USD 2.1 bln.