Ukraine current account balances out in May

Ukraine’s current account (C/A) balance had an
insignificant deficit of USD 41 mln in May, being almost balanced for the second
month in a row (after a USD 193 mln surplus in April). In
5M18, the C/A deficit amounted to USD 415 mln (vs. USD 308 mln in 5M17). The
trade deficit’s May enlargement by 21% m/m was almost fully compensated by
growth in primary and secondary income (58% m/m and 15% m/m, respectively).

The trade deficit enlarged to USD 786 mln in May (from
USD 356 mln in April) mostly due to goods imports. In particular, a 13% rise in
mineral product imports was behind renewed growth in energy imports. Machinery
(18% yoy) and chemicals (11% yoy) were other important contributors to import
growth. Overall, goods import growth decelerated to 16% yoy in May from 18% yoy
in April.

Goods export growth decelerated to 13% yoy in May from
20% yoy in April, mostly due to less food exports (-3.3% yoy). Meanwhile,
strong growth in metals (30% yoy) and chemicals (49%) exports restrained the
trade deficit.

The surplus of Ukraine’s financial and capital
increased to USD 304 mln in May (from USD 101 mln in the prior month), mainly
because of an inflow of trade credits (USD 399 mln of net inflow in May vs. USD
80 mln of net outflow in April). The surplus of Ukraine’s combined balance of
payments reached USD 266 mln (vs. USD 357 mln a year ago). In 5M18, the balance
of payments surplus amounted to USD 284 mln.

Evgeniya Akhtyrko: The
deceleration in goods exports in May was expected given the high comparative
base of the same month last year, when the jump in food exports of 30% yoy
drove goods export growth to 22% yoy. That said, we expect goods exports to
accelerate in June amid a high growth rate of metals and chemicals. At the same
time, goods imports are not likely to cool significantly amid restored growth
of energy imports.

We expect the trade deficit to swell USD 10.8 bln through
the end of the year (from USD 2.9 bln in 5M18), assuming an almost even growth
pace between exports (we project 11.3% yoy in 2018) and imports (11.5% yoy in
2018). Our forecast is for a 2018 C/A deficit of USD 2.4 bln (vs. a USD 2.1 bln
deficit in 2017).