C/A deficit shrinks to USD 967 mln in February

Ukraine’s current account deficit narrowed to USD 967 mln in February, significantly less than a year ago (USD -1.6 bln), according to NBU data released on March 25. Exports grew 8.1% yoy in the month, including metals (+3.1% yoy), which improved for the first time since December 2011. Food exports (+32%) remained the key driver of goods exports growth in February. Imports again declined primarily due to falling energy use (-39% yoy). In particular, natural gas imports decreased 36% yoy. Total goods imports fell 7.5% yoy.

Financial and capital accounts were stronger than a year ago (USD 2.26 bln vs. USD 1.6 bln), largely the result of USD 1 bln Eurobonds placed on Feb. 4. Low individual USD demand (USD 381 mln vs. USD 497 mln a year ago) also contributed to the positive financial flow. At the same time, FDI keeps sliding with USD 492 mln net inflow in February, almost half of a year ago (USD 892 mln).

Ukraine’s general external financial balance (combined balances of current and financial accounts) was USD 1.3 bln in February. Part of this sum was used to pay back USD 934 mln of the IMF debt. The rest (USD 363 mln) was reported to replenish gross foreign reserves (USD 24.7 bln, or 2.8 months of imports by the end of February).

Alexander Paraschiy: The February C/A deficit appeared much better than we anticipated. To a large extent, it was defined by a significant decline in energy imports (which can be explained by a warm February). However, food and metal exports growth was above our expectations. In this respect, assuming the positive tendency with metals sustains itself, we see a chance that the C/A deficit might start shrinking gradually. At the same time, we expect that energy imports will revive themselves in March (due to abnormally cold weather) and food exports will shrink owing to declining grain exports. Until we have more evidence that exports are tending towards improvement, we are keeping our C/A deficit forecast at UAH 14.8 bln in 2013.