Ukraine goods trade balance slightly negative in November

Ukraine’s goods trade balance in November was reported at a USD 168 mln deficit, compared to the USD 861 mln deficit in the same year-ago period, according to a Jan. 14 Ukrstat report. For 11M14, the goods trade balance reached a USD 293 mln surplus compared to a USD 12.3 bln deficit in the same year-ago period.

In November, exports fell 27.3% yoy to USD 4.0 bln, mainly due to declines in mineral products (-41.1% yoy), metals (-29.6% yoy), grains (-29.0% yoy), and machinery (-26.6% yoy). Imports plunged 34.5% yoy to USD 4.2 bln on reduced spending on energy (-33.5% yoy), vehicles (-65.1% yoy), chemicals (-34.0%), and machinery equipment (-22.5% yoy). Through the month, exports to CIS countries plunged 43.8% yoy while exports to the EU contracted 20.6% yoy. For 11M14, goods exports fell 11.3% yoy to USD 50.1 bln and imports slumped 27.6% yoy to USD 49.8 bln.

Alexander Paraschiy: The trade balance is improving gradually but not as fast as we had anticipated. A faster decline in exports (almost 30% yoy) is the main reason for the November outcome, disregarding the sharp contraction of imports on the back of a devaluation effect. As a result, by the end of 2014 we estimate the trade balance of goods to reach nearly USD 0.8 bln (adjusting for market gas prices in 2Q14, which are estimated by Ukrstat at USD 268.5 per tcm currently) compared to a USD 1.0 bln surplus anticipated initially (according to Ukrstat methodology).

Against this backdrop, we should take into account that the war in parts of the Donetsk and Luhansk regions – that were responsible for a quarter of merchandise exports – will keep affecting export dynamics negatively in 2015, at least due to the high comparative base. Still, we anticipate the declining rates of imports to remain stronger, which is what should secure a further improvement in the goods trade balance. In particular, we expect imports to fall about 17% yoy in 2015 (compared to 29% yoy in 2014), as well as a 12% decline in exports (nearly 14% yoy in 2014), resulting in a goods trade balance approaching a USD 2.5 bln surplus (according Ukrstat methodology).