BoP current account deficit declines to USD 188 mln in June

In June, Ukraine’s balance of payments current account deficit declined to USD 188 mln from USD 790.0 mln in the previous month, according to preliminary data released by the National Bank of Ukraine yesterday. For 1H11, the CA deficit was USD 2.5 bln vs. a USD 983 mln surplus in 1H10. Svetlana Rekrut: The current account deficit’s decline in June was predominantly due to export growth (+41.8% y-o-y vs. +36.2% y-o-y in May) driven by agricultural and chemical product exports. Import dipped slightly to +43.3% y-o-y vs. +52.8% y-o-y in May given a slowdown in non-energy imports (to +34.8% y-o-y from +46.9% y-o-y in May). In June, the capital and financial account (FA) deficit amounted to USD 188.0 mln while for 1H11 its surplus totaled USD 4.3 bln. We attribute June’s FA deficit to a reduction in external debt in the private sector and continued growth in FX cash. Net FDI inflow declined to USD 427 mln, mainly due to the repayment in direct investor loans. The balance of loans and bond repayments hit a USD 1.1 bln surplus thanks to a sovereign Eurobond placement of USD 1.25 bln in early June. The overall balance of payments in June was a USD 376 mln deficit, which was covered by the National Bank of Ukraine’s international reserves. We expect CA to stay in the red for the rest of 2011, while the overall balance of payment should amount ~USD 2.0 bln at end-2011.