Ukraine reports nearly balanced C/A in March 2015

Ukraine’s C/A deficit was reported USD 13 mln in March 2015 which is much better compared to USD 630 mln deficit a year ago. Exports declined 29.9% yoy while imports fell by 32.5% yoy throughout the month. Exports of goods fell 32.2% yoymainly due to a plunge in the export of mineral products (-56.7% yoy), a slump in machinery supplies (-48.7% yoy), a decrease in chemical exports (-32.0% y/y), a drop in metals exports (-29.6% yoy) and a fall in foodstuff supplies (-19.4% yoy). Goods imports fell 33.9% yoy on the back of a foodstuff imports slump (-51.6% yoy), a machinery imports plunge (-40.4% yoy), a chemical products imports decrease (-32.9% yoy), and an energy bill contraction (-18.7% yoy).

Financial and capital accounts worsened to USD 292 mln deficit in March vs. USD 426 mln surplus a year ago (and USD 283 mln deficit in February 2015). External redemptions on loans and bonds (USD -1.6 bln) were the main reason for the outcome. At the same time, FDI was reported positive (USD 78 mln vs. USD -345 mln a year ago) and foreign currency cash was returning to the banking system in March (USD 120 mln surplus vs. USD 287 mln deficit a year ago).

The general balance in March was reported with a USD 305 mln deficit which was covered by gross international reserves. Nevertheless, gross international reserves increased to USD 10.0 bln (2.1 month of imports) by the end of month on the back of a USD 4.9 bln IMF wire.

Alexander Paraschiy: The February hryvnia decline was the main reason for a March external accounts improvement.  For sure, exports will be falling further and faster (near 30%) at least until August due to a high statistical base effect; however, with the exchange rate hovering at the range of 23-25 hryvnia per USD, we expect a further narrowing of the C/A deficit throughout the year.  Unless a new wave of confrontation in the easternmost Ukraine arises, we expect the C/A deficit to be near USD 1.7 bln by the end of the year.