BoP current account turns to deficit in 8M10

Ukraine’s BoP current account balance saw a UAH 563 mln deficit in August, according to the NBU data released yesterday, compared to a UAH 82 mln deficit in August 09. For 8M10, the deficit amounted to UAH 562 mln (USD 71 mln). Mykyta Mykhaylychenko: The deficit widening came on the back of higher oil and machinery imports due to domestic economic recovery, while some rebound in export-oriented metallurgy production in the recent months has not fully been reflected in the commodity export volumes yet (total commodity imports were up 40% y-o-y in August vs. +33% y-o-y for exports). For the whole year 2010, we expect the current account balance to be close to zero. The financial account, in turn, was in surplus for UAH 593 mln (USD 75 mln) in August vs. a UAH 2.5 bln deficit in August 09. For 8M10, the financial account saw a UAH 5.8 bln surplus (USD 0.7 bln) with FDI responsible for 53% of this number. We see the financial account remaining in the black in the months ahead as the government has already placed USD 2 bln Eurobonds in September and a number of corporates are in line to tap the market as well. We expect the financial account to be at up to a USD 7 bln (5.3% of GDP) surplus for the whole year 2010.