Ukraine C/A surplus reaches USD 6.6 bln in 2020

Ukraine’s current account (C/A) switched to a surplus
of USD 6.6 bln in 2020 from a deficit of USD 4.1 bln in 2019 due to a lower
trade deficit and increased surplus of the primary income balance, the National
Bank of Ukraine (NBU) reported on Jan. 29. According to our estimate, the C/A
surplus amounted to 4.4% of GDP in 2020 (vs. a 2.7% of GDP deficit in 2019).

 

The trade deficit dropped to USD 1.7 bln in 2020 from
USD 12.5 bln in 2019. In particular, goods imports declined 14.7% yoy to USD
51.5 bln (vs. 7.7% yoy growth in 2019), while goods exports slid 2.0% yoy to
USD 45.2 (vs. 6.3% yoy growth in 2019). Meanwhile, the surplus of primary
income balance increased to USD 4.7 bln from USD 1.9 bln, while the surplus of
the secondary income balance declined to USD 3.6 bln from USD 6.5 bln.

 

The deficit of the financial account in 2020 amounted
to USD 4.6 bln (vs. USD 10.1 bln in 2019). The surplus of balance of payments
in 2020 amounted to 2.0 bln (vs. USD 6.0 bln surplus in 2019).

 

In December alone, the C/A surplus shrank to USD 113
mln from USD 783 bln in November mostly due to a decline in primary income
balance to USD 49 mln from USD 447 mln in November. The trade deficit enlarged
to 326 mln from USD 44 mln in November.

 

Goods exports surged 18.2% yoy to USD 4.5 bln in
December, accelerating from 9.4% yoy growth in November. In particular, metals
export surged 31.2% yoy (vs. 2.5% yoy drop in November), chemicals export
jumped 20.4% yoy (vs. 1.2% yoy decline in November). At the same time, food
export slowed to 5.5% yoy growth (from 11.3% yoy growth in November). Machinery
exports declined 6.9% yoy (vs. 8.7% yoy decline in November).

 

December’s goods imports increased 1.4% yoy, switching
from 5.5% yoy decline in November. In particular, imports of machinery advanced
10.7% yoy (vs. a 3.7% yoy decline in November), imports of chemicals surged
21.3% yoy (vs. 22.2% yoy increase in November), foods imports advanced 9.0% yoy
(vs. 9.7% yoy  growth in November). At the same time, imports of mineral
products declined 33.1% yoy (vs. 36.2% yoy decline in November).

 

The financial account surplus jumped to USD 2.7 bln in
December (vs. a deficit USD 0.8 bln in November) reflecting a net inflow of
under the operations of the government sector amounting USD 2.4 bln. In
particular, they included borrowing from the EU and the World Bank of USD 1.4
bln, the net inflow from international government bonds of USD 0.7 bln and the
net inflow of the foreign currency from non-residents purchasing domestic
Eurobonds of USD 0.4 bln.

 

Due to the massive inflow under the financial account,
the surplus of the balance of payments in December switched to a surplus of USD
2.8 bln after being in a minor deficit in November.

 

Evgeniya Akhtyrko: External
trade intensified significantly in December, showing larger volume than in
pre-crisis December 2019. Goods exports picked up significantly amid very
favorable conditions at external markets for Ukrainian metals producers. Goods
imports growth was mostly driven by a jump in machinery imports which could be
the result of increased budget outlays at the year-end.

 

The further trend of Ukraine’s exports will largely
depend on how long the favorable conditions for Ukraine’s metal exporters last.
The volume of goods imported will depend on the external prices of energy
resources and the demand for imported machinery.

 

We expect the C/A surplus to decline to USD 0.6 bln
in 2020 due to the swelling of the trade deficit.