Current account deficit balloons to USD 3.3 bln in 7M11

Ukraine’s current account deficit hit USD 3.3 bln (~2.6% of GDP) vs. USD 313 mln surplus in 7M10, according to preliminary data published yesterday by the National Bank of Ukraine. In July, Ukraine’s current account deficit rose to USD 574 mln, from USD 188 mln in the previous month. The consolidated balance of payments was close to zero in July. Svetlana Rekrut: The CA deficit in July stemmed from a slowdown in exports (to +26.4% y-o-y in July vs. +42.7% y-o-y in June), even though imports also lost steam +26.3% y-o-y vs. 45.3% y-o-y in June. Declines in growth in metallurgy (+25.1% vs. +36.0% in 1H11), chemicals (+54.5% vs. +62.8% in 1H11) and machinery (+29.8% vs. +36.3% in 1H11) were driven by global trends, while agriculture (-1.6% y-o-y; 1H11 data on agriculture was not published by NBU) exports suffered from high competition from Russia. We relate the dip in imports to a decrease in natural gas purchases by 2.1x comparing to the monthly average in 1H11. The financial and capital account balance was positive and amounted to USD 682 mln (vs. a USD 95.0 mln deficit in June) and fully covered the current account gap. At end-July, FX reserves increased slightly to USD 37.8 bln, equaling 4.5 months of imports.