Ukraine current account deficit surges to USD 1.1 bln in July

Ukraine’s current account (C/A) deficit enlarged to
USD 1.1 bln in July, from USD 125 mln in the previous month, owing to a significant
deterioration in goods trade balance, the National Bank of Ukraine (NBU)
reported on Aug. 31. In 7M18, the C/A deficit amounted to USD 1.7 bln (vs. USD
0.7 bln in 7M17).

The trade deficit surged to USD 1.7 bln in July (from
USD 0.8 bln in June), as imports of goods jumped 24.9% yoy  (vs. 9.9% yoy
growth in June) to USD 5.0 bln – the highest since May 2014. In particular,
growth of imports of mineral products (mostly energy goods) further accelerated
to 33.0% yoy from 29.5% yoy in June. Other important contributors to imports
growth were machinery (16.0% yoy growth) and chemicals (18.3% yoy growth).

Goods exports increased 12.6% yoy, accelerating from
11.5% yoy growth in June, mostly owning to a renewal of growth in foods exports
(8.0% yoy growth vs. 0.4% decline in June) and a faster growth of exports in
mineral products (25.8% yoy growth vs. 11.5% yoy growth in June). Meanwhile,
the growth in metals exports slowed to 19.9% yoy from 35.2% yoy in June.

In 7M18, goods imports rose 15.6% yoy while exports
grew 11.9% yoy.

The surplus of Ukraine’s financial and capital account
enlarged to USD 1.1 bln in July (from USD 125 mln in the prior month), mainly
because of the inflow under trade credits (USD 579 net inflow in July vs. USD
70 net outflow in June) and other short- and long-term credits to the private
sector (USD 570 net inflow in July vs. USD USD 238 net inflow in June).

In July, the C/A deficit slightly surpassed the
surplus of the financial and capital account bringing Ukraine’s balance of
payments to a deficit of USD 170 mln. In 7M18, the surplus of balance of
payments amounted to USD 137 mln.

Evgeniya Akhtyrko: The swift
acceleration of import growth in July was unexpected. Possibly, the renewed
depreciation of the national currency (by 5% in July-August) will bring the
appetite of Ukraine importers down in the following months, thus cooling the
growth rate of imports.

At the same time, the renewal growth of foods
exports helps to maintain the growth rate of exports, restraining the
enlargement of C/A deficit. According to our projections, Ukraine’s C/A deficit
will reach USD 2.1 bln, assuming the goods trade deficit of USD 10.8 bln.