BoP deficit shrinks to USD 145 mln in November

In November, the total BoP deficit shrank 75% m-o-m to USD 145 mln, according to the NBU. The current account (CA) deficit shrank 38% m-o-m to USD 508 mln in November and amounted to USD 1.6 bln in 11M10. Mykyta Mykhaylychenko: For full year 2010, we expect the current account deficit to be 1.3% of GDP vs. a deficit of 1.5% in 2009. Given recent deficit widening, the CA deficit could reach as much as 2%-2.5% of GDP in 2011. The financial account (FA) in turn, widened its surplus in November by 54% m-o-m to USD 363 mln (USD 7.4 bln in 11M10). That was on the back of increasing FDI (USD 725 mln in November, 78% of which went to the banking sector), as well as a USD 568 mln Eurobond placement by the State Agency for Euro-2012 Preparation with government guarantees (this was classified as investments into “other sectors” although it is classified as part of public debt, in its guaranteed part, by the government). We expect the CA deficit to still be covered by the FA surplus in 2011, although short-term deviations are possible. This, coupled with continuous IMF support (last week Ukraine received its latest USD 1.5 bln loan tranche) points at UAH exchange rate stability, with chances of “managed” UAH depreciation (within 5%) to support exports being slightly above those of UAH appreciation.