Ukraine C/A switches to USD 18 mln surplus in November

Ukraine’s current account switches to USD 18 mln
surplus in November from a USD 315 mln deficit in the prior month, the National
Bank of Ukraine (NBU) reported on Dec. 30. A year ago, the C/A deficit was USD
154 mln. Improved primary incomes (USD 119 mln vs. USD -44 mln a year ago) and
secondary incomes (USD 349 mln vs. USD 309 mln a year ago) were the main
sources for the surplus. Primary incomes reflect growing compensation of
employees from abroad (USD 513 mln in November vs. USD 355 mln a year ago).

 

In the meantime, the deficit on goods and services
widened to USD 450 mln from USD 419 mln a year ago, driven by an expanding
trade deficit of goods (USD 734 mln from USD 632 mln a year ago). In November,
goods exports improved 17.3% yoy (17.4% yoy growth in October) with rising
machinery (83.4% yoy) and metals (50.8% yoy). Goods imports slowed to 17.1% yoy
growth from 22.1% yoy in the prior month, slowed down by machinery (20.6% yoy
growth vs. 33.1% yoy in October) and chemicals (22.7% yoy growth vs. 29.4%
yoy). On the other hand, food (31.3% yoy) and energy imports (25.9% yoy) kept
growing strongly. Non-energy imports slowed to 14.3% yoy growth from 20.1% yoy
in October.

 

For 11M17, the C/A deficit was reported at USD 2.96
bln, which is slightly less than USD 3.03 bln a year ago.

 

In November, the financial and capital accounts
surplus was USD 473 mln, almost unchanged from USD 470 mln in the prior month
(USD 74 mln a year ago). The main source of the surplus was FDI rising to USD 169
mln from USD 65 mln in October (USD 99 mln a year ago). An increase in trade
credits (USD 177 mln from USD 77 mln in the prior month) also contributed to
the positive financial balance.

 

Outflow of individual cash from the banking system
reached USD 93 mln in November after USD 44 mln in October. Commercial banks
reduced their foreign currency exposure to USD 274 mln from USD 930 mln in
October.

 

The general balance (C/A plus capital and financial
accounts) was USD 491 mln in the black, improving from USD 155 mln in the prior
month (USD 80 mln deficit a year ago). USD 364 mln from the surplus was
allocated to servicing IMF debt in November, while the rest was used to
underpin gross international reserves, which increased by 0.9%, or USD 170 mln,
to USD 18.9 bln (3.7 months of future imports).

 

Alexander Paraschiy: The
external account statistics for November were a positive surprise. Remarkably,
the NBU revised its statistics for 10M17, substantially improving the C/A
estimate for the period to a USD 2.9 bln  deficit from a USD 3.3 bln
deficit reported previously. The main source for improvement was a better
estimate for primary incomes (USD -0.7 bln vs. USD -1.1 bln for 10M17) and for
secondary incomes (USD 3.1 bln vs. USD 2.8 bln for 10M17). 

 

At the same time, the trade deficit on goods and
services worsened to USD 5.3 bln for 10M17 from USD 5.0 bln estimated
previously. In fact, this statistics revision – coupled with a minor C/A
surplus for November – promises a USD 3.3 bln C/A deficit (3.1% of GDP) for
2017, which is much better than USD 4.1 bln we projected.

 

For 2018, we still expect trade deficit growth on the
back of recovering domestic consumption, which will be pushing imports up.
However, in light of the NBU’s recently improved view on primary incomes
performance, we are improving our C/A deficit forecast to USD 4.1 bln (3.6% of
GDP) in 2018 from USD 4.9 bln (4.3% of GDP) estimated previously.