Ukraine goods trade deficit worsens slightly in January

Ukraine’s January trade deficit on goods increased slightly to USD 142.8 mln from USD 127.8 mln a year ago, according to state statistics released on March 17. Yet total exports and imports declined significantly by 12.3% and 11.7%, respectively. Exports fell on the back of a contraction in chemicals (-51.4% yoy) and locomotives (-64.9% yoy). Imports, as usual, slid due to declines in the energy sector (17.0% yoy). Machinery equipment imports fell 23.5% yoy.

Alexander Paraschiy: Though external trade didn’t improve in January, we anticipate a shrinking trade deficit through the year on the back of the hryvnia’s decline. It is difficult to predict how exports will be affected by the national currency’s devaluation in light of the ongoing conflict with Russia. However, we project a significant cut in non-energy imports throughout the upcoming months.

What’s more, we also should see a lower energy bill in 2014 owing to the 1Q14 natural gas price discount and declared intention to heavily rely on reverse gas supplies from the EU. Later on, when the EU lifts import tariffs on Ukrainian commodities, we should also see some gradual revival of Ukrainian exports. Against this backdrop, we project the trade deficit shrinking to USD 5.5 bln in 2014 (from USD 13.7 in 2013), according to state statistics methodology.