Ukraine C/A deficit narrows to USD 0.2 bln in August

Ukraine’s current
account (C/A) deficit narrowed to USD 226 mln in August from USD 597 mln in
July (USD 490 mln a year ago), according to a National Bank of Ukraine (NBU)
report on Sept. 30.  Exports sped up to 15.3% yoy growth from 11.1% yoy in
the prior month. Imports slowed to 8.5% yoy growth from 16.5% yoy in July.
Goods exports increased 12.8% yoy mainly on the back of food exports (17.5% yoy
growth). Goods imports grew 10.4% yoy reflecting a 32.3% yoy increase in energy
imports and a 13.6% yoy growth of machinery imports. Remarkably, all import
items slowed from the prior month. Non-energy imports eased to 4.7% yoy growth
from 14.9% yoy in July.

For 8M17, the C/A
deficit was reported at USD 2.1 bln from a USD 1.8 bln deficit a year
ago. 

Financial and
capital accounts improved to a USD 744 mln surplus in August from USD 312 mln in July (USD 506 mln
a year ago). Banking loans from abroad (USD 205 mln net inflow vs. 624 net
outflow in July) and stronger individual cash return to the backing system (USD
496 mln vs. USD 360 mln in July) stand behind improved financial inflow. 
Net FDI also grew to USD 194 mln from USD 137 mln in the prior month.

The
general balance (C/A plus capital and financial accounts) reached USD 518 mln
surplus in August from a USD 285 mln deficit in July (USD 16 mln surplus a year
ago). USD 363 mln from the surplus was allocated on the IMF redemptions. The
rest pushed gross international reserves 1.4% higher or by USD 240 mln. By the
end of August, reserves reached USD 18.0 bln, which is 3.6 months of future
imports.

Alexander
Paraschiy: The
August results were surprising. We did expect a narrowing C/A deficit in August
but we believed metals and iron ore would be the drivers for this change.
Instead exports of foods and easing imports (despite appreciating hryvnia)
secured the result.

For now, we will
view the August numbers as outliers and we will need more observations to
understand how the developments have changed after export prices recovered. So
far we are keeping our C/A deficit projection unchanged at USD 4.8 bln (4.6% of
GDP) in 2017.