Ukraine trade balance improves on May natural gas cuts

Ukraine’s goods trade balance reached a USD 180 mln surplus in May in contrast to a USD 1.3 bln deficit a year ago, according to state statistics released on July 15. Goods exports declined 16.3% yoy and imports decreased 33.5% yoy in May. Gas imports reached 0.9 bcm, a 60% yoy drop.

Sliding energy imports (-48.0% yoy) and falling transportation equipment imports (-62.7% yoy) were the key factors cutting goods imports by USD 2.5 bln to USD 5.0 bln.

Alexander Paraschiy: The continued decline in Russian natural gas imports was a surprise. May gas imports of 0.9 bcm is the lowest monthly volume since 2009, particularly surprising in light of the 2.6 bcm of monthly gas imports that’s needed to reach the targeted 27 bcm by the year’s end. In other words, the government is delaying gas imports, only to compensate them later in the year.

The major portion of the transportation equipment imports drop stemmed from a 99.6% yoy decline in vessels imports, slicing off USD 358 mln yoy (oil rigs were imported by Naftogaz in May 2012). Interestingly, the government’s widely discussed auto import duties only shaved off USD 200 mln from general goods imports.

Meanwhile, goods exports declined by USD 1.0 bln yoy on the back of shrinking metal exports (-25.7% yoy) and falling grain exports (-59.7% yoy).

Though we see the improved May trade balance as the result of delayed gas imports (to a large extent), we are improving our projected trade deficit to USD 13.5 bln from USD 14.1 bln (state statistics methodology) and to USD 18.3 bln from USD 18.9 bln (NBU methodology) for 2013, based on a decreased outlook for heavy machinery equipment imports.