Ukraine C/A surplus shrinks USD 0.8 bln in June

The surplus of Ukraine’s current account (C/A) reached
USD 0.8 bln in June, declining from a USD 1.5 bln surplus in May, the National
Bank of Ukraine (NBU) reported on July 3. The trade balance switched to the
deficit of USD 215 mln in June from a USD 516 mln surplus in May, with the
goods trade deficit swelling to USD 794 mln (vs. a 95 mln deficit in May). The
primary income account reached a USD 692 mln surplus (vs. a 764 mln surplus in
May), while the secondary income account surplus amounted to USD 296 mln (vs. a
281 mln surplus in May).

In 1H20, the current account surplus amounted to USD
6.7 bln (vs. a USD 1.9 bln deficit in 1H19).

Goods imports slid 17.2% yoy to USD 3.8 bln in June,
slowing down from a 35.2% yoy plunge in May. The decline was mostly due to the
drop in imports of mineral products of 52.6% yoy (vs. a 53.2% yoy fall in May)
and the decline of machinery imports of 6.6% yoy (vs. 25.4% yoy in May).
Meanwhile, food imports jumped 34.5% yoy (vs. a 1.1% yoy decline in May). In
1H20, goods imports dropped 16.6% yoy.

The decline in goods exports slowed to 7.1% yoy to USD
3.0 bln in June from a drop of 23.7% yoy in May. In particular, the fall in
metals exports slowed to 18.7% yoy (vs. 32.1% yoy in May), and food exports
declined 5.0% yoy (vs. a 13.4% yoy drop in May). At the same time, exports of
chemicals advanced 18.7% yoy (vs. a 18.7% yoy decline in May), and exports of
mineral products picked up 3.6% yoy (vs. a 35.2% yoy plunge in May).  In
1H20, goods exports declined 6.1% yoy.

The financial account balance switched to a USD 0.2
bln surplus in June from a USD 1.8 bln deficit in May. In particular, the net inflow
from the state sector amounted to USD 334 mln as a result of inflow generated
by E.U. financing of EUR 500 mln and the outflow of USD 233 mln related to the
sale of local bonds by non-residents. At the same time, the net outflow on
foreign direct investment amounted to USD 323 mln. The net foreign currency
inflow to the banking sector amounted to USD 244 mln.

In June, Ukraine’s balance of payments switched to a
USD 978 mln deficit from a USD 353 mln surplus in May. In 1H20, the surplus of
the balance of payments amounted to USD 1.2 bln (vs. a USD 0.7 mln surplus in
1H19).

Evgeniya Akhtyrko: As we expected, the
declines in both in imports and exports slowed down in June, as the bleakest
period of the corona crisis is mostly over for Ukraine and its major trading
partners. It’s worth noting the big jump in June food imports, which points to
the fast renewal of consumer demand in Ukraine.

We are likely to see a further slowdown in
declining exports and imports in Ukraine. We expect the current account to be
balancing out in the nearest months.