Ukraine C/A balances out in March

Ukraine’s current account (C/A) switched to a minor
deficit of USD 62 mln in March from USD 442 bln surplus in prior month due to
the enlargement of the trade deficit and the deficit of primary income, the
National Bank of Ukraine (NBU) preliminarily reported on April 30. The goods
trade deficit enlarged to USD 932 mln from USD 554 mln in March, while the
surplus of trade in services enlarged to USD 500 mln from USD 375 mln. The
primary income balance switched to a deficit of USD 40 mln from a surplus of
USD 329 mln in March due to the two-fold increase in payments on investment.
The surplus of the secondary income enlarged to USD 410 mln from USD 292 mln in
May.

In 1Q21, C/A surplus amounted to USD 0.9 bln (vs. USD
2.2 bln surplus in 1Q20).

Goods import surged 26.7% yoy to USD 5.8 bln in March
(vs. 6.0% yoy growth in February). The volume of goods imports was the highest
since October 2019. In particular, imports of machinery jumped 140% yoy, food
imports increased 24.8% yoy, chemical imports advanced 13.0% yoy. Imports of
energy products increased 19.0% yoy. Goods exports advanced 24.8% yoy (vs.
14.3% yoy growth in February) to USD 4.8 bln  – a record high since 2014.
The growth was mostly driven by a surge in exports of ferrous metals (72.4%
yoy) and mineral products (75.4% yoy). In addition, machinery exports advanced
18.4% yoy, exports of chemicals advanced 12.5% yoy. At the same time, food
exports slid 3.3% yoy.

The financial account deficit enlarged to USD 659 mln
in March compared to USD 472 mln in February. In particular, the net foreign
currency outflow from the government sector amounted to USD 361 mln; the
outflow banking sector was USD 280 mln. At the same time, the net inflow under
trade loans amounted to USD 274 mln.

The deficit of Ukraine’s balance of payments amounted
to USD 713 mln in March (vs. a USD 28 mln deficit in February).

In 1Q21, the deficit of Ukraine’s balance of payments
amounted to USD 961 mln (vs. a deficit of USD 139 mln in 1Q20).

Evgeniya Akhtyrko: Ukraine’s
external trade boomed in March. The export volume ballooned amid an incredibly
favorable global price situation for iron ore and ferrous metals. Meanwhile,
the leap in goods imports needs more scrutiny. Possibly, the March surge in
imports was just an accumulated effect of low import volumes observed during
the crisis year of 2020. Anyway, April’s external volume results are likely to
be lower due to reinforced quarantine restrictions in Ukraine during the month.
We expect to see a switch of Ukraine’s C/A back to a surplus in April.

According to our forecast, the surplus of Ukraine’s
C/A will amount to USD 0.5 bln (vs. a USD 6.2 bln surplus in 2020).