Ukraine C/A deficit shrinks to USD 0.7 bln in October

Ukraine’s current account (C/A) deficit shrank to USD 0.7 bln in October from USD 1.1 bln in September due to a positive switch in the primary income balance, the National Bank of Ukraine (NBU) reported on Nov. 30.  Primary income switched to a USD 385 mln surplus from a USD 102 mln deficit in September on a decrease of coupon payments on international Eurobonds. The trade deficit (goods & services) swelled to USD 1.4 bln from USD 1.3 bln due to a deteriorated balance of trade in goods. 

In 10M19, the C/A deficit amounted to USD 3.4 bln (vs. USD 4.1 bln in 10M18).

In October, the goods trade deficit swelled to USD 1.52 bln from USD 1.45 bln in September. Goods exports slowed to 7.1% yoy growth to reach USD 4.2 bln (vs. a 12.3% yoy surge in September). Goods imports increased 2.9% yoy to USD 5.7 bln (keeping the same growth rate as in September). The weaker export growth was mostly due to slower growth of food exports (22.3% yoy in October vs. 29.4% yoy growth in September) and a drop in exports of mineral products (14.4% yoy decline in October vs. 15.2% yoy growth in September).

The relatively slow growth of imports was prompted by mineral products, which declined 9.1% yoy in October. In addition, chemical imports dropped 6.4% yoy in October (vs. 3.7% yoy growth in September). Meanwhile, machinery imports stayed strong, surging 19.4% yoy in October.

The financial account surplus contracted to USD 0.5 bln from USD 1.2 bln in September. In particular, net foreign currency outflow from the banking sector amounted to USD 145 mln (vs. net inflow of USD 225 mln in September). In addition, the purchase of foreign currency by the population in October rose to USD 541 mln (from USD 287 mln in September).

Ukraine’s balance of payments switched to a USD 146 mln deficit in October from a USD 60 mln surplus in September. In 10M19, the balance of payments surplus amounted to USD 2.1 bln (vs. a USD 0.3 bln deficit in 10M18).

Evgeniya Akhtyrko: The slow growth of merchandise imports – amid dropping spending on energy imports – is keeping C/A deficit growth in moderation. Meanwhile, the growth of merchandise exports slowed down owing to weakening grain exports.

We are improving our 2019 C/A deficit forecast, revising it downward to USD 4.5 bln from USD 5.4 bln, mainly because of the lower-than-expected growth of merchandise imports.