Ukraine C/A deficit narrows to USD 0.1 bln amid sharp exports slowdown

In April, the C/A deficit narrowed to USD 146 mln vs. USD 732 mln in March, the National Bank of Ukraine (NBU) reported on May 30. At the same time, the C/A substantially worsened vs. a USD 164 mln surplus a year ago. Exports of goods sharply slowed down to +7.5% yoy vs. +38.2% yoy in March.  Falling metal exports (-7.1% yoy vs. +36.8% yoy in March) as well as slowed exports of foods (+15.0% yoy vs. +49.3% yoy) were the main contributors to this result. Imports also eased (down to +13.4% yoy vs. +31.6% yoy in March) but at least preserved two-digit growth. Energy imports (+62.2% yoy) and machinery (+19.7% yoy) remain the key drivers of imports growth but also energy and machinery are the very items responsible for the sharp imports slowdown in April. Non-energy imports also eased down to +5.2% yoy vs. +20.1% yoy in the prior month.

For 4M17 the C/A deficit reached USD 1.3 bln – the same level as a year ago.

Financial and capital accounts substantially improved up to a USD 1.1 bln surplus in April vs. USD 0.4 bln surplus in March (USD 0.3 bln surplus a year ago). A EUR 579 mln loan from the EU as well as increased individual cash returning to the banking system (USD 266 mln vs. USD 131 mln in March) was the main source for the improvement. FDI remains tiny with USD 43 mln of net inflow. 

Positive financial inflow pushed the general balance (C/A plus capital and financial accounts) noticeably in the black up to USD 970 mln surplus in April vs. USD 355 mln deficit in March (USD 469 mln surplus a year ago). The positive general balance as well as a USD 1.0 bln wire from the IMF increased gross international reserves by 13.6% (USD 2.1 bln) up to USD 17.2 bln as of end-April, which is 3.6 months of future imports.

Alexander Paraschiy: Though statistics were better in April than in March – we have observed a substantial worsening on external trade with a sharp slowdown of exports. And we already have a cumulative C/A deficit equal to that of one a year ago (till March, the C/A balance was better than in 2016). In fact this tendency is in line with our predictions. Resource prices declined and this tendency will be widening the trade balance through the course of the year.  Against this backdrop our initial C/A deficit forecast at USD 5.1 bln (5.5% of GDP) for 2017 is still valid.