Ukraine CA deficit shrinks 5.7x to USD 208 mln yoy in May
1 July 2013
Ukraine’s current account deficit shrunk to USD 208 mln in May, which is 5.7x lower than a year ago (USD 1.2 bln), according to NBU data released on June 27. The main factor was a large drop in commodities imports (-31.2% yoy) against a less dramatic exports contraction (-17.8% yoy).
A 2.6x drop in natural gas imports and a decline in investment imports (-39.5% yoy) defined the May imports slump. Exports slid in the categories of food (-34.8%), metals (-25.7%) and machinery (-21.3%). Remarkably, mineral exports surged 41.5% yoy.
The financial and capital accounts balance worsened 2.3x to USD 722 mln (vs. USD 1.68 bln a year ago). Net FDI plunged almost 5x to USD 114 mln vs. USD 559 mln a year ago. Individual cash demand improved USD 114 mln, suggesting that households sold more US dollars than having bought them.
Against this backdrop, Ukraine’s general external financial balance (combined balances of C/A and financial accounts) was reported positive at USD 514 mln, allowing for partially covering a USD 920 mln IMF repayment. Still, gross reserves declined USD 700 mln in the month to USD 24.5 bln, or 2.7 months of imports.
Alexander Paraschiy: The May C/A figures were significantly better than we anticipated. The gas imports decline – the steepest this year – and the investment imports drop shaved off USD 2.5 bln yoy from May commodity imports. The exports decline was impressive, but did not make up for the commodity imports drop.
It’s still premature to say that the trade balance has started improving. Firstly, with investment imports we see a strong high statistical base effect: May 2012 was the month when EURO 2012 equipment was imported.
Secondly, we view the May gas imports drop as merely delayed demand. Ukraine should import at least 27.3 bcm of gas till the year end, according to the 2013 state’s balance. Even such an optimistic plan presumes nearly 2.6 bcm of gas imports every month through June-December, which is nearly three times higher monthly than imported in May. In this respect, gas imports will start recovering soon.
A much more important signal was the decline in non-energy imports (excluding investment imports). In May, this segment dropped 17.2% yoy while rising 7.8% yoy in 4M13. We will have grounds to talk about a trend if the pattern continues beyond a month of statistics that contain a high seasonal effect.
Taking into account the decline in May imports, we are revising our C/A deficit estimate to USD 14.8 bln (from USD 15.4 bln) for 2013.
