Ukraine C/A deficit reaches USD 0.3 bln in July

Ukraine’s current account (C/A) deficit amounted to
USD 293 mln in July, enlarging from a USD 31 mln deficit (revised from a previously
reported surplus of USD 295 mln) in the prior month  mostly due to a
deteriorated trade balance, the National Bank of Ukraine (NBU) preliminarily
reported on Aug. 31. The goods trade deficit amounted to USD 578 mln (vs. a USD
327 mln deficit in June), while the surplus of trade in services increased to
USD 332 mln from USD 316 mln in June. The deficit of the primary income balance
enlarged to USD 439 mln from USD 371 mln (revised from previously reported
deficit of USD 55 mln) in the prior month. The surplus of the secondary income
balance increased to USD 392 mln from USD 321 mln in June.

 

In 7M21 the C/A deficit amounted to USD 0.9 bln (vs. a
USD 4.1 bln surplus in 7M20).

 

Goods exports surged 54% yoy in July (vs. 61% yoy
growth in June) to USD 5.2 bln. The growth was mostly driven by a surge in
exports of ferrous metals (2.2x yoy) and mineral products (2.4x yoy). In
addition, food exports increased 14% yoy, exports of chemicals jumped 19% yoy,
machinery exports advanced 15% yoy.

 

Goods imports jumped 33% yoy to USD 5.8 bln in July
(vs. 36% yoy growth in June). In particular, imports of mineral products surged
75% yoy, chemical imports advanced 35% yoy. In addition, imports of machinery
jumped 27% yoy and imports of foods added 16% yoy.

 

The surplus of the financial account amounted to USD
776 mln, staying almost flat from a surplus of USD 776 mln in June (revised
from previously reported surplus of 457 mln). In particular, the net inflow
under the operations of the government sector amounted to USD 342 mln. The net
inflow from foreign direct investment is assessed at USD 617 mln, including the
income reinvestment of USD 483 mln. At the same time, the net foreign currency
outflow from the banking sector amounted to USD 356 mln, the outflow under the
trade credits amounted to USD 300 mln.

 

The surplus of Ukraine’s balance of payments amounted
to USD 484 mln in July (vs. a USD 753 mln surplus in June).

 

In 7M21, the surplus of Ukraine’s balance of payments
amounted to USD 0.8 bln (vs. a surplus of USD 1.1 bln in 7M20).

 

Evgeniya Akhtyrko: Like in May, the NBU made significant
revisions to the C/A of previous months. According to the new data, the C/A
balance in June switched to a deficit of USD 31 mln from the previously
reported surplus of USD 295 mln. In addition, the C/A surplus in May and April
were also shaved by around USD 0.6 bln. The revisions were mostly related to
investment income under the primary account balance. As a result, the C/A for
1H21 switched to a deficit of USD 0.6 bln instead of the previously reported
surplus of USD 0.4 bln. These revisions didn’t affect the balance of payments
as the respective adjustments were made in the financial account.

 

Given such a significant statistical revision, our
forecast of a C/A surplus of USD 0.5 bln for 2021 now looks unachievable. Amid
the expected enlargement of the trade deficit the C/A is likely to land with a
deficit of around USD 1 bln in 2021 (vs. a USD 5.2 bln surplus in 2020).