Ukraine C/A deficit reaches USD 0.5 bln in June

Ukraine’s current account (C/A) deficit reached USD
518 mln in June from USD 180 mln in the prior month, the National Bank of
Ukraine (NBU) reported on July 28. A year ago, the C/A surplus reached USD 88
mln. Exports slowed to 12.9% yoy growth in June from 20.5% yoy in May. Imports
also eased to 23.3% yoy growth from 33.1% yoy in May, but remained stronger
than exports. Key export drivers were minerals (+48.5% yoy), metals (+15.1%
yoy) and food (+10.7% yoy).

Commodity imports grew 30.1% yoy in June on the back of
energy (78.1% yoy), machinery (41.3% yoy) and chemicals (24.1% yoy). 
Non-energy imports grew in double-digits (20.4% yoy), somewhat slowing from the
prior month (27.9% yoy in May).

In 6M17, Ukraine’s C/A deficit reached USD 1.57 bln
from a USD 0.95 bln deficit a year ago.

Financial and capital accounts improved to a USD 0.8
bln surplus in June from USD 0.5 bln in May (USD 0.3 bln a year ago), owing to
individual cash returns to the banking system (USD 553 mln) and growing
long-term credits (USD 181 mln inflow vs. USD 262 mln outflow in May). FDI also
jumped in June to USD 630 mln from USD 14 mln in May (and USD 526 mln for
5M17). However, a major part of the reported FDI (USD 401 mln) was banking
loans re-registered as statutory capital of banks.

The general balance (C/A plus capital and financial
accounts) narrowed to a USD 306 mln surplus in June from USD 357 mln in May
(USD 377 mln a year ago).  The surplus pushed gross international reserves
higher by 2.0% (USD 352 mln) to USD 18.0 bln (3.7 month of future imports).

Alexander Paraschiy: External accounts kept the trajectory we initially outlined. 
Exports slowed amid strong imports, which boosted the C/A deficit, a trend that
we expect will dominate till the year end. Strengthening metal prices in July
might offer some easing in the deficit, however the current trend still
promises a deficit much wider than a year ago.  We project the C/A deficit
at USD 4.8 bln (4.6% of GDP) in 2017.