Ukraine C/A balances out in February

Ukraine’s current account (C/A) was almost balanced in
February with a USD 9 mln surplus compared to a USD 133 mln deficit a year ago,
the National Bank of Ukraine (NBU) reported on March 30. The deficit of trade
in goods and services increased to USD 640 mln in February (from USD 467 mln in
January). Even with a significant slowdown in import growth, the goods trade
deficit widened to USD 733 mln (from USD 527 mln in January).

Imports of goods decelerated to 9.5% yoy growth (from
30.6% yoy in January) with imports of energy products declining 16.9% yoy after
a 16.0% yoy increase in January. Exports of goods slowed to 10.6% yoy from
23.1% yoy in the prior month. In particular, exports of machinery dropped 3%
yoy from a growth of 50% in the previous month. The surplus in services (USD 93
mln), primary income (USD 343 mln) and secondary income (USD 306 mln)
compensated the negative result of trade in goods.

Ukraine’s financial and capital accounts turned to a
USD 243 mln surplus in February (from a USD 568 mln deficit in the prior month
and surplus of USD 102 mln a year ago). The surplus was mainly generated by
attracted trade credits (net inflow of USD 351 mln vs. net outflow of 319 mln
in January), FDI inflow of USD 110 mln (USD 80 mln in January) and portfolio investment
of USD 207 mln (vs. USD 111 mln in January). Meanwhile, the net currency
outflow from the banking sector amounted to USD 344 mln (vs. USD 98 mln in
January).

Sale of cash currency by individuals in February resulted
in currency inflow of USD 146 mln (revised to USD 17 mln in January). The
combined balance of payment  (C/A plus capital and financial accounts)
turned to a USD 252 mln surplus (from a revised USD 449 mln deficit in January
and a USD 27 mln deficit a year ago). February’s repayments on an IMF loan of
USD 375 mln exceeded the balance of payments (BoP) surplus, resulting in a drop
of gross international reserves by 0.9% m/m to USD 18.4 bln
(3.5 months of future imports).

Last week, the NBU made retroactive changes to
Ukraine’s BoP starting 2015 by applying a new methodology that accounts for increased inflow of
remittances. The updated data shows that
Ukraine’s C/A balance was also positive in January, reaching USD 119 mln
instead of a USD 61 mln deficit reported previously.

Evgeniya Akhtyrko: Significant
swings in the growth pace of exports and imports point to the overall weakness
of the Ukrainian economy. A weak industry result in February
could partially result in a slowdown in external trade. Our projection for
Ukraine’s 2018 current account is being revised given the NBU’s recent
adjustment in remittances. The uneven data on external goods trade will be
taken into account as well.