2Q Current Account Balance Almost Even.

Ukraine’s current account balance in 2Q06 was only slightly in the red, at -$39m, and showed a strong improvement from 1Q06 when the balance was -$743m. The cumulative 1H06 current account balance was –$782m. The improvement was due to a smaller trade deficit ($475m in 2Q06, down from $1.11 bn in 1Q06). The other side of the balance of payments also looked much improved, with more net foreign direct investment ($1.41 bn in 2Q06, up from $662m in 1Q06) and a smaller deficit in “other investments”, where capital flight generally shows up ($989m in 2Q06, from $2.43 bn in 1Q06).  Alexander Viktorov: The figures provide further confirmation of the much-improved economic picture in 2Q06 thanks mainly to increased steel prices. The decreased “other investments” deficit also backs up the supposition that much of the weakness in 1Q06, when the NBU had to sell almost $2 bn of reserves, was election-related. Given that April was a weak month, the balance was probably positive in June, and according to preliminary data released earlier this month, the current account was in surplus by $250m in July.