Ukraine C/A switches to USD 1.4 bln surplus in April

Ukraine’s current account (C/A) switched to a USD 1.4
bln surplus in April from a USD 0.29 bln deficit in March due to the trade and
primary income balances switching to surplus, the National Bank of Ukraine
(NBU) reported on May 29. The trade balance switched to a USD 748 mln surplus
in April from a USD 269 mln deficit in March, with the goods trade surplus
reaching USD 193 mln (vs. a 705 mln deficit in March) and services trade
surplus of USD 555 mln (vs. a USD 436 mln surplus in March). The primary income
account reached a USD 420 mln surplus (vs. a 281 mln deficit in March).

 

In 4M20, the current account surplus amounted to USD
1.8 bln (vs. a USD 0.2 bln deficit in 4M19).

 

Good imports plunged 28.4% yoy to USD 3.4 bln in
April, accelerating from a 6.0% yoy decline in March. In particular, the
decline in machinery accelerated to 28.7% yoy (from a 2.6% yoy slide in March).
Imports of chemicals dropped 17.5% yoy (vs. 2.1% yoy growth in March). The
decline in imports of mineral products deepened to 34.1% yoy (from 13.4% yoy in
March). In 4M20, goods imports dropped 10.7% yoy.

 

Goods exports declined 4.0% yoy to USD 3.6 bln in
April (vs. a decline of 3.5% yoy in March). The drop was mostly due to a deeper
fall in exports of ferrous metals (-18.1% yoy in April vs. -13.1% yoy in
March). Meanwhile, food exports improved to 6.6% yoy (from 2.3% yoy in March).
In addition, exports of mineral products advanced 12.1% yoy (vs. 3.5% yoy in
March). In 4M20, goods exports declined 1.0% yoy.

 

The deficit of the financial account shrank to USD 0.7
bln in April from USD 1.5 mln in March. The net outflow from the government of
USD 341 bln was the result of local debt purchased by non-resident investors
(USD 307 mln) and the payments on loans to international financial institutions
(USD 39 mln). In addition, the volume of cash currency outside the banking
system swelled by USD 799 mln. At the same time, the net foreign currency
inflow to the banking sector amounted to USD 358 mln.

 

In April, Ukraine’s balance of payments switched to a
USD 0.8 bln surplus from a USD 1.8 bln deficit in March. In 4M20, the surplus
of the balance of payments amounted to USD 577 mln (vs. USD 283 mln in 4M19).

 

Evgeniya Akhtyrko: As we expected, Ukraine’s
imports were more affected than exports from the coronavirus crisis. The demand
for imported goods dropped dramatically in April, due to severe quarantine
restrictions and increased uncertainty related to the pandemic. Imports of
energy resources plummeted amid declining global prices and Ukraine’s falling
industrial output.

 

As previously, Ukraine’s exports are affected by
sluggish exports of ferrous metals. However, the reinforced growth of food
exports and mineral products during the bleak month of April was a positive
surprise.

 

Like in April, Ukraine’s goods imports drop in May is
likely to be more severe than the decline in goods exports. We maintain our
vision that a switch to surplus for the 2020 C/A balance is quite a possible
scenario as demand for imports is likely to be depressed during the whole year.