Ukraine C/A deficit shrinks to USD 0.9 bln in October

Ukraine’s current account (C/A) deficit declined to
USD 863 mln in October from USD 1.6 bln in September, the National Bank of
Ukraine (NBU) reported on Nov. 30. The primary income balance switched to a USD
449 mln surplus from a USD 218 mln deficit in the previous month. In 10M18, the
C/A deficit amounted to USD 4.6 bln (vs. USD 1.7 bln in 10M17).

The trade deficit didn’t change much in October,
staying at USD 1.7 bln, the highest since December 2013. Goods exports picked
up 11.0% yoy (vs. a 3.2% yoy decline in September). In particular, food exports
surged 15.8% yoy (vs. a 9.8% decline in Sepetember). At the same time, metals
exports slowed to 3.2% yoy growth (vs. 8.3% growth in September). Meanwhile,
goods imports accelerated to 22.2% yoy growth (from 16.1% yoy growth in
September). Imports of machinery accelerated to 34.0% yoy growth (from 22.6% yoy
growth in September). Imports of metals increased 31.9% yoy (vs. 7.5% yoy
growth in previous month).

In 10M18, goods imports rose 16.0% yoy, while exports
grew 10.0% yoy.

The financial account surplus in October amounted to
USD 1.0 bln, unchanged from the previous month. The net foreign currency inflow
to the banking sector reached USD 259 mln (vs. USD 84 mln of net outflow in
September). Like in the previous month, the net inflow under trade credits was
high at USD 632 mln (compared to USD 858 mln in September).

In October, the surplus of both the financial and
capital accounts surpassed the current account deficit, bringing Ukraine’s
balance of payments to a surplus of USD 164 mln. In 10M18, the deficit of
balance of payments amounted to USD 254 mln (vs. a surplus of USD 2.1 bln in
10M17).

Evgeniya Akhtyrko: Fast-growing imports resulted in the C/A deficit swelling. We expect
goods exports to pick up somewhat by the year end amid accelerated food
exports. However, it will not be enough to avoid further enlargement of the
current account. We estimate the C/A deficit to reach USD 5.1 bln (around 4% of
GDP) in 2018. The swelled C/A deficit should inevitably result in a new round
of hryvnia exchange rate “adjustment.”