Central bank radically improves Ukraine C/A balance estimate due to remittances

The National Bank Ukraine (NBU) radically hiked its
estimates of its private remittances to Ukraine for 2015-17 by about USD 2 bln
p.a. in a report published on March 21. The data revision was prompted by new
data on migration of Ukrainian workers during the last three years that showed
their economic contributions from abroad were severely underestimated.

Being recalculated under a new methodology, the
estimated amounts of remittances increased by USD 2.0 bln to USD 9.3 bln in
2017, by USD 2.1 bln to USD 7.5 bln in 2016 and by USD 1.8 bln to USD 7.0 bln
in 2015. Respectively, this resulted in the following upward revision of
current account (C/A) balance from a 3.5% of GDP deficit to 1.6% deficit in
2017, from a 3.7% of GDP deficit to 1.4% deficit in 2016 and from a 0.2% of GDP
deficit to a 1.8% surplus in 2015. Meanwhile, the consolidated balance of
payments did not change since the mirror adjustments were applied to the
financial account.

The methodology for estimating the amount of
remittances to Ukraine was revised based on a new survey on work migration
performed by Ukraine’s State Statistics Service and recently incorporated
estimates on cash remittances to Ukraine by the central banks of Russia and
Poland.

Evgeniya Akhtyrko: Besides
offering a better picture on the massive impact of Ukraine’s workforce abroad,
this statistical revision is important as it gives more clarity about the
sources of foreign currency inflows to the country. The increasing role of
remittances in Ukraine’s balance of payments has been repeatedly cited by the
NBU as an important factor that helped to alleviate devaluation pressure amid
an increasing trade deficit, and now there is more evidence for this trend.
Even with this dramatic revision however, we suspect that the new estimates
still do not fully reflect the significant role of remittances.

Nonetheless, we will take the upgraded remittance data
into account when revising our projections for Ukraine’s current account.