Ukraine goods trade deficit improves in January

Ukraine’s goods trade balance improved in January to a USD 25.0 mln deficit compared to a USD 180.9 mln deficit in the same year-ago month, UkrStat reported on March 17. Trade activity overall has stalled as both goods exports and imports dropped dramatically, by 31.2% and 33.4%, respectively. The biggest declining export items were mineral products (-55.9% yoy), machinery (-36.4% yoy) and metal supplies (-32.2% yoy). The biggest contracting import items were metals (-54.2% yoy), machinery (-31.7% yoy), energy (-22.8% yoy) and chemical products (-22.3% yoy).

In January, exports to CIS countries decreased 54.9% yoy and to the EU by 31% yoy.

Alexander Paraschiy: Disregarding the narrowed deficit, trade is much worse than we expected. We anticipated steady growth in trade surplus after the hryvnia plunged more than 50% last year. Yet the warfare in the easternmost Donbas region has devastated exports and kept external accounts in red.

Throughout the year, exports will fall even further (we estimate by 28%) owing to the war with Russia and the CIS region’s shrinking economy. However, further hryvnia decline (from UAH 22/USD currently) should cut imports at an even stronger rate, resulting in trade balance improvement in 2015. Previously, we projected a substantial trade surplus in 2015 of nearly USD 5.1 bln, according to UkrStat methodology. However, the disappointing start to the year prompts us to revise our projections to a USD 0.6 bln trade surplus for 2015.