Ukrainian external accounts were balanced in February

Ukraine’s current account (C/A) went to negative USD 1.3 bln in February vs. a USD 0.4 bln surplus in January, the NBU reported yesterday. The trade balance deficit widened to USD 1.7 bln from USD 0.1 bln in January partly on an increase in gas imports from Russia. Both export and import growth decelerated (to 6% yoy and 4% yoy, respectively) in February due to disruptions in transportation caused by tough weather conditions. The monthly financial account balance improved considerably from a USD 1.3 bln shortfall in January to USD 1.2 bln surplus in February thanks to strong FDI inflows (net USD 0.8 bln) and reversal of trade credits (net inflows stood at positive USD 1.1 bln vs. negative USD 1.1 bln in January). Another positive development was that net debt inflows to the corporate sector fully offset external debt repayments by banks in 2M12. Net FX cash outflows from the banking sector increased 35% mom to USD 0.8 bln. Overall, the monthly external financing gap (combined current and financial account balances) amounted to a mere USD 0.1 bln in February and USD 0.9 bln in 2M12.

Svetlana Rekrut: February’s BoP data shows external funding pressure was not high, which enabled the NBU to keep the hryvnia broadly stable vs. the U.S. dollar. We believe net FDI inflows (which we project at 3% of GDP in 2012) and 100%+ rollover of corporate and sovereign external debt will continue to support the balance of payments in 2012. Our key concern at this point is still sizable cash outflows from banks which might add pressure to the FX market through yearend. On the current account side, we think export growth is likely to remain weak throughout 2012, given a lack of visible improvement in global commodity markets. We maintain our forecast for a current account shortfall of 6.3% of GDP, of which 3.5% should be offset by capital inflows and the remainder covered by NBU reserves (c. USD 7 bln).