BoP Current account deficit grows to USD 2.3 bln in 5M11

In May, the BoP current account (CA) deficit grew to USD 746 mln from USD 296 mln in April, according to the National Bank of Ukraine. For 5M11, the CA deficit was USD 2.3 bln vs. USD 0.4 bln surplus in 5M10. The widening was predominantly due to imports growth driven by rise in oil and oil products imports (1.7 x and 2.8x y-o-y, respectively). The machinery imports grew by 90.7% y-o-y, including automobiles (190% y-o-y) , triggered by continuing recovery in domestic demand. In May, the financial account (FA) surplus was USD 767 mln, the 5M surplus amounted UAD 4.5 bln. The growth was triggered by FDI inflows (mainly Ukrtelecom privatization) and trade finance loans inflow. Importantly, foreign currency outflow continued in May through the cash market reaching USD 4.1 bln 5M11 (vs. USD 68 mln in 5M10). Svitlana Rekrut: We expect the CA to stay in the red due to recovering domestic demand and growth of energy prices covered by financial account inflows. For the full year 2011, we expect balance of payment surplus at app. USD 2.0 bln.