Ukraine C/A switches to USD 0.4 bln deficit in February

Ukraine’s current account (C/A) in February switched
to a deficit of USD 381 mln, from a surplus of USD 527 mln, due to an enlarged
trade deficit, the National Bank of Ukraine (NBU) reported on March 29. The goods
trade deficit enlarged to USD 1.1 bln from USD 235 mln in January. In addition,
the trade balance in services switched to a deficit of 47 mln from a surplus of
USD 67 mln in the prior month. In 2M19, the C/A surplus amounted to USD 146 mln
(vs. USD 187 mln in 2M18).

The goods trade deficit surged amid accelerated
imports. Goods imports increased 14.9% yoy, fueled by mineral product imports
rising 13.8% yoy (vs. a 13.1% yoy decline in January). Yet it was machinery
imports, which surged 38.9% yoy (vs. 21.4% yoy in February), that continued to
lead overall import growth.

Meanwhile, goods exports slowed to 7.3% yoy growth
(from 9.6% yoy growth in January). Metal exports fell 17.9% yoy (vs. 7.8%
growth in January). At the same time, food exports – the major driving force of
Ukrainian exports – accelerated to 26.9% yoy (from 22.9% growth in January). In
2M19, goods imports rose 7.4% yoy, while exports grew 8.5% yoy.

The February financial account surplus was USD 131 mln
(vs. a USD 590 mln deficit in January). In particular, FDI inflow swelled to
USD 369 mln (from USD 168 mln in January). The foreign currency inflow under
the short- and long-term loans of the corporate sector amounted to USD 393 mln
(vs. the outflow of USD 89 mln in January). In addition, the foreign currency
inflow under the trade credits amounted to USD 504 mln (vs. the outflow of USD
730 mln in January).

In February, the balance of payments deficit enlarged
to USD 248 mln (from USD 68 mln in January). In 2M19, the balance of payments
deficit amounted to USD 316 mln (vs. a deficit of USD 196 mln in 2M18).

Evgeniya Akhtyrko: As we expected, the current
account switched to a deficit as soon as the growth of goods imports  restored
itself amid an expected renewal of mineral products imports (apparently,
natural gas). Goods exports continue to be driven by surging agricultural
exports after a record-high grain harvest.

Meanwhile, other important export items like ferrous
metals and machinery are not likely to demonstrate a confident growth trend in
the nearest future.

We expect the C/A deficit to enlarge to USD 5.6 bln
in 2019 (vs. USD 4.5 bln in 2018) due to the growing trade deficit.