Ukrainian external financing gap surges in June on debt repayment
30 July 2012
Ukraine’s current account deficit widened to USD 1.0 bln in June, which brings the 1H12 shortfall to USD 3.6 bln (vs. a gap of USD 2.8 bln in 1H11), or 4.6% of 1H12 GDP. The increase in the deficit was mainly caused by a deterioration in the merchandise trade balance – USD 6.9 bln in 1H12 vs. USD 5.4 bln in the comparable period of last year. The financial account turned negative at USD 0.5 bln in June (but positive at USD 2.5 bln in 1H12) on sizable repayments of public debt (the government redeemed a USD 0.5 bln Eurobond and repaid a USD 1.0 bln portion of the VTB loan). Net debt inflows to the corporate sector in 1H12 (USD 3.2 bln) fully offset debt repayments by banks (negative USD 1.3 bln).
Vitaliy Vavryshchuk: Ukraine’s C/A will stay under pressure in 2H12 due to weak external demand and we project the 2012 gap at USD 10.9 bln (5.8% of 2012E GDP). Meanwhile, Ukraine’s financial account will likely improve notably as the government raised USD 2.0 bln via the placement of Eurobonds in July and debt inflows to the corporate sector should remain strong through end-2012. We project the country’s financial account will reach a positive USD 4.8 bln, implying an external financing gap of about USD 6.1 bln, which we expect to be covered by NBU reserves.
