Ukraine C/A deficit widens 3% yoy in February

Ukraine’s current account (C/A) deficit reached USD 405 mln in February, according to UkrStat report on Mar. 27. The deficit is 2.5% higher than a year ago. Exports of goods and services declined 34.6% yoy while imports fell by 31.7% yoy throughout the month. 

Exports of goods fell 34.1% yoy, mainly due to a plunge in mineral products exports (-58.0% yoy), a slump in machinery supplies (-48.7% yoy) and a drop in metals exports (-44.0% yoy).  Exports of services contracted 36.7% yoy.

Imports of goods slid (-32.9% yoy) on the back of the plunge in machinery imports (-49.9% yoy). Also contributing to the downturn was a decline in foodstuff imports (-41.7% yoy), and a decrease in chemical products imports (-34.3% yoy). At the same time, energy imports increased 1.7% yoy due to higher gas prices. Imports of services declined 25%.

Financial and capital accounts improved to a USD 338 mln deficit in February 2015 vs. a USD 1.7 bln deficit a year before.  External redemptions of loans and bonds (USD -1,036 mln) were the main reason for the outcome. At the same time, FDI was reported positive (USD 274 mln vs. USD -205 mln a year ago) and foreign currency has been flowing into the banking system (USD 166 mln surplus vs. USD 1.7 bln deficit a year ago).

As a result, the February’s general balance was at USD 743 mln deficit, which was covered by gross international reserves. By the end of the month, gross international reserves were reduced to USD 5.6 bln, or 1.2 months of future imports.

Alexander Paraschiy: Ukraine’s external trade result for February appears to be much worse than expected. Declining rates of exports even exceeded the speed of import contraction, disregarding the new wave of hryvnia devaluation which started on Feb. 5. A worsening export of services, which depends heavily on gas transit and tourist revenues, was the main reason for the disappointing outcome. So far we are keeping our 2015 C/A balance forecast at USD 1.5 bln (1.9% of GDP); however, we will have to revise our C/A estimate if exports keep falling stronger than imports.