Ukraine C/A deficit touches USD 875 mln in September
31 October 2016
Ukraine’s current account (C/A) deficit deepened to USD 875 mln in September owing to a large trade deficit (USD 590 mln) and a substantial negative value on balance of incomes (USD 525 mln), the National Bank reported on Oct. 28. The C/A deficit was USD 451 mln in August and USD 2.3 bln in 9M16.
The September’s negative balance of incomes reflected a USD 505.4 mln coupon payment on Eurobonds. The trade deficit resulted from a 5.3% yoy exports decline (+1.5% yoy in August) amid still strong import growth of 7.0% yoy (compared to +14.4% yoy in August). Goods exports declined 7.1% yoy owing to falling chemicals (-27% yoy), minerals (-25% yoy), machinery (-8.5% yoy), foods (-3.5% yoy) and metals (-3.4% yoy). Commodity imports grew 6.8% yoy on the back of non-energy (+8.7% yoy) and energy (+0.9% yoy) imports.
Financial and capital accounts substantially improved to a USD 1.3 bln surplus in September from a USD 454 mln surplus in the prior month, owing to the arrival of a U.S. guarantee for USD 1.0 bln in Eurobonds. Also FDI rose to USD 444 mln from USD 173 mln in the prior month. Individual cash returning to the banking system remained high at USD 474 mln compared to USD 310 mln in August.
The impressive capital accounts prompted the general balance to improve to a USD 474 mln surplus in September from a USD 16 mln surplus in the prior month. The general balance surplus, coupled with a USD 1.0 bln loan from the IMF, caused gross international reserves to increase by USD 1.5 bln to USD 15.6 bln as of end-September, which equals 3.6 months of future imports.
Alexander Paraschiy: The September C/A deficit was exactly what we expected, though it looks like external trade trends somewhat changed in October with an upwards tendency in iron ore and metal prices. Also we have observed steady hryvnia strengthening, which might indicate that exports proceeds are improving. We cannot rule out that this strengthening is driven by financial inflows rather than an improved trade balance. Against this backdrop, we are keeping our initial C/A forecast for 2016 unchanged at USD 4.0 bln (4.5% of GDP).
