C/A deficit halves in November

Ukraine’s current account deficit was halved in November to USD 841 mln vs. USD 1.574 mln a year ago (and vs. USD 1597 mln in October), according to NBU data released on Dec. 27. At the same time, the 12-month rolling indicator remained unchanged at 7.6% of GDP due to an upward revision of C/A deficit estimates for the year’s previous months. A fast expansion in grain exports (+55.6% yoy) and a decline in oils and fuels imports (-78.5% and -19.7% respectively) were the key factors in the trade balance improvement last month. Financial and capital accounts also strengthened to USD 302 mln from USD -402 mln in October owing to a USD 1.25 bln Eurobonds placement and strengthened FDI, which improved to USD 685 mln (from USD 391 mln in October). In spite of the positive capital flow, external financial gap (combined balances of C/A and financial account) having stood at USD 539 mln in November due to still-elevated cash demand of USD 1.45 bln.  This deficit and a USD 932 mln IMF payback was covered from gross reserves.

Alexander Paraschiy: In November, the trade balance continued improving on the back of extraordinary grain exports. Anticipated restrictions sped up the process and prompted traders to ship more than 5 million tons of wheat already by December, which was almost all the wheat tonnage earmarked for export by June 2013. The November performance is in line with our previous estimate of USD 13.6 bln, or 7.6% 2012E GDP by the year’s end. With capital flows, we observe a lull for now at the cash market due to the seasons’ holiday and reduced devaluation tension. The NBU even allowed some hryvnia strengthening, which means that in December money authorities might even replenish its reserves. By the year’s end, we expect gross reserves to stay at USD 25.5 bln, or 2.9 months of future imports