Ukraine C/A deficit approaches 8.0% of GDP
2 October 2013
Ukraine’s current account (C/A) deficit increased to USD 1.52 bln in August vs. USD 1.46 bln a year ago, according to National Bank of Ukraine (NBU) data released on September 30. Sliding machinery (-33.2% yoy) and metal (-14.8% yoy) exports against a backdrop of stronger gas imports (only 4.7% lower than a year ago) were the key reasons for the result.
The financial and capital accounts balance again was positive at a USD 1.3 bln surplus in August, which is nearly half of last year’s result (USD 2.1 bln in August 2012). Net FDI was USD 320 mln (USD 866 mln a year ago). Foreign cash outflow from the banking system was elevated (USD 533 mln); however, less than in August 2012 (USD 748 mln).
The general balance (excluding USD 925 mln repaid to the IMF that month) was reported with only a minor deficit of USD 232 mln. By the end of August, gross reserves decreased USD 1.0 bln to USD 21.7 bln, or 2.6 months of future imports, according to the NBU.
Alexander Paraschiy: The further expansion of the C/A deficit is in line with our estimates. By the end of August, the 12-month rolling C/A deficit already reached 7.9% of GDP (USD 14.1 bln) after declining to 6.9% of GDP (USD 12.7 bln) by June on the back of low energy imports.
As we discussed previously, the need to replenish natural gas storage tanks for the heating season pushed the authorities to increase gas imports drastically. Ukraine imported 2.9 bcm of gas in August (30% higher than the monthly average in 1H13) and we expect Ukraine will import even more in each of the months till December.
At the same time, we see poor chances for a revival of Ukrainian exports in view of continued tensions with Russia, halted fertilizer production in September and steadily weak external demand. The strong harvest also did not help exports growth much, adding only 1.1% yoy to foods exports in August 2013.
All in all, the situation has been developing exactly in line with our considerations and estimates. In this respect, we are keeping our C/A deficit forecast at USD 14.8 bln for 2013.
