Ukraine C/A turns positive in January

Ukraine’s current account (C/A) turned from negative USD 1.1 bln in December to positive USD 0.4 bln in January, according to preliminary data from the National Bank of Ukraine yesterday. The deficit of trade in goods stood at a mere USD 0.1 bln (vs. a USD 1.3 bln shortfall in December) on an upsurge in grain exports and a decline in imports of energy. Unlike the C/A, the financial account deteriorated considerably to negative USD 1.3 bln in January (the worst monthly balance since January 2010) on redemptions of trade loans by corporates. Trade loans aside, the non-financial private sector raised net USD 0.8 bln in debt on external markets, while banks repaid net USD 0.4 bln. Net FX cash outflows from the banking system nearly halved mom to USD 0.6 bln.

Svetlana Rekrut: January’s C/A balance was stronger than expected, but only due to temporary factors. As energy imports increased in February, we think the C/A turned negative already last month, with the gap expected to widen to 6.3% of GDP in 2012. On the other hand, we project the financial account to improve as sizable redemptions of trade loans in January were likely one-off and the debt rollover ratio should exceed 100% for the corporate sector in 2012, in line with previous years. Overall, we see Ukraine’s total external financing needs (combined C/A and financial account balances) at 3.1% of 2012E GDP, with the gap fully covered by NBU reserves.