Ukraine C/A switches to USD 0.2 bln deficit in February

Ukraine’s current account (C/A) switched to a USD 159
mln deficit in February from a surplus of USD 722 mln in January, the National
Bank of Ukraine (NBU) reported on Mar. 31. The external trade deficit enlarged
to USD 871 mln from USD 142 mln in January. The goods trade deficit amounted to
USD 871 mln (vs. a deficit of 142 mln in January). In addition, the surplus of
primary income balance dropped to USD 207 mln from USD 408 mln in January.

Goods exports grew 1.2% yoy to USD 3.6 bln (vs. 2.2%
yoy growth in January). The weaker growth was mostly due to a slowdown in food
exports (1.4% yoy growth in February vs. 14.3% yoy growth in January). The
exports of mineral products increased 14.1% yoy, and machinery exports grew
12.1% yoy. Meanwhile, metal exports declined 2.0% yoy (vs. a 26.4% yoy fall in
January).

Goods imports declined 4.7% yoy to USD 4.5 bln (vs. a
1.6% yoy decline in January). The drop was reinforced due to sliding machinery
imports (-12.9% yoy in February vs. -0.4% yoy in January). Imports of mineral
products declined 12.8% yoy. Meanwhile, food imports improved 15.6% yoy, while
imports of industrial products surged 33.3% yoy.

The February financial account surplus swelled to USD
890 mln (vs. USD 183 mln in January). In particular, net foreign direct
investment inflow amounted to USD 314 bln, while net portfolio investment
inflow reached USD 651 mln. Net foreign currency inflow under trade credits amounted
to USD 421 mln.

The surplus of Ukraine’s balance of payments in
February amounted to USD 733 mln (vs. a deficit of USD 248 mln in February
2019).

Evgeniya Akhtyrko: The decline
of goods imports reinforced, but the growth capacity of goods exports is
exhausted due to weakening growth of food exports. The growth capacity of goods
exports is also exhausted due to weakening growth of food exports.

The global damage caused by the coronavirus pandemic will
inevitably affect Ukraine’s external trade, which we expect will plunge in 2020
owing to declines in both goods imports and exports, with the imports drop
being higher.

Meanwhile, the price collapse on the global energy
markets, and the dropping demand for investment and consumer goods, will have a
greater effect on Ukraine’s imports than the decline in global prices for grain
and ferrous metals, which are the major items of Ukraine’s exports. A switch to
surplus for the 2020 C/A seems to be quite a possible scenario.