Ukraine reports USD 3.9 bln trade surplus in 2014

The Ukrainian economy concluded 2014 with a trade surplus (goods and services) of USD 3.9 bln compared to a USD 8.5 bln deficit for 2013, UkrStat reported on Feb. 16. The surplus on services worsened to USD 5.6 bln from USD 6.7 bln the prior year. At the same time, the deficit on goods improved to USD 0.5 bln from USD 13.5 bln the prior year. As usual, Ukrstat adjusted the general balance for tolling operations (USD 1.2 bln), making the general trade balance improvement less impressive.

In December, the goods trade balance worsened to a USD 617 mln deficit from a USD 168 mln deficit in the previous month, with the main reason being a stronger decline in exports (-32.0% yoy compared to -27.3% yoy in November) amid a stable declining rate in imports (-34.4% yoy compared to -34.5% yoy in the prior month). Export contraction accelerated due to falling shipments of mineral products (-56.9% yoy vs. -41.1% yoy in November), metals (-31.7% yoy vs. -29.6% yoy in November), and machinery (-39.4% yoy vs. -26.6% yoy in November).

Alexander Paraschiy: The tendency towards a widening goods trade deficit during the last few months of 2014 is quite disturbing. After the Russian-backed assault in eastern Donbas, exports to both Russia and EU suffered significantly. In December, goods exports to the EU fell 29.8% yoy and to Russia by 51.8% yoy. Further decline is inevitable given that there is no sign of resolving the Donbas war and trade relations with Russia are unlikely to improve.

On the other hand, imports are also expected to keep sliding by the double-digits due to a new devaluation wave that started in early February. Against this backdrop, by the end of 2015 we project a USD 5.1 bln trade surplus with imports continuing to fall faster than exports.