Ukraine C/A balances out in November

Ukraine’s current
account (C/A) was almost fully balanced in November, showing an insignificant
surplus of USD 0.06 bln
(vs. a deficit of USD 0.6 bln in October), the National Bank of Ukraine (NBU)
reported on Jan. 2.  The improvement of the C/A balance was due to an
increase in the surplus of the primary account balance to USD 714 mln (from USD
385 mln in October) amid declined payments on investment income and swelled
inflow from salaries.  The trade deficit (goods & services) shrank to
USD 0.9 bln from USD 1.4 bln due to a smaller deficit of  trade in goods.

In 11M19, the C/A
deficit amounted to USD 3.4 bln (vs. USD 4.4 bln in 11M18).

In November, the
goods trade deficit shrank to USD 1.17 bln from USD 1.54 bln in October. Goods
exports declined 3.4% yoy to USD 3.9 bln (vs. 7.0% yoy growth in October).
Goods imports fell 1.9% yoy to USD 5.1 bln (vs. 3.0% yoy growth as in October).
Goods exports switched to a decline due to a faster fall in exports of metals
(15.0% yoy decline in November vs. a 11.0% slide in October) and mineral
products (19.3% yoy decline in November vs. 14.4% yoy in October).

In addition, the
growth of food exports slowed to 0.8% yoy (vs. 22.2% yoy in October). The
decline in goods imports was mostly due to a deeper fall in imports of mineral
products (a 27.5% yoy fall in November vs. 10.0% yoy decrease in October).

The financial
account surplus amounted to USD 544 mln, staying almost unchanged from USD 527
mln in October. The foreign currency inflow was mostly due to the operations of
the private sector.

Ukraine’s balance of
payments switched to a USD 601 mln surplus in November from a USD 109 mln
deficit in October. In 11M19, the balance of payments surplus amounted to USD
2.7 bln (vs. a USD 1.1 bln surplus in 11M18).

Evgeniya Akhtyrko: The decline of merchandise exports
in November was not a surprise. The effect of record-high grain exports, which
had supported export growth until recently, wore off. Meanwhile, Ukrainian
exporters of ferrous metals and mineral products are suffering from unfavorable
conditions at the global markets. Lower imports are resulting from weak prices
for energy products, which remain the main import item for Ukraine.

We expect December’s trends in Ukraine’s external sector will be not
much different from those in November. Amid weakened foreign trade, we expect
the C/A deficit in 2019 to contract to USD 3.5 mln (or around 2.3% of GDP) from
USD 4.4 mln (or 3.3 % of GDP) in 2019.