Ukraine goods trade balance worsens to USD 295 mln deficit in January

Ukraine’s trade deficit on goods worsened to USD 295 mln in January compared to USD 36 mln a year ago, according to an UkrStat report on March 16. A stronger contraction of exports (-31.9% yoy) compared to a somewhat slower imports decline (-23.0% yoy) were behind the outcome.  Exports have plunged on slumping metals (-48.7% yoy), mineral products (-45.3% yoy) and foods (-27.9% yoy), which were responsible for 75% of the exports decline. Imports dropped solely due to a 52.6% yoy energy bill decline, which generated 90% of the decline. Exports plunged to CIS countries by 48.6% yoy (USD 233 mln) and to the EU by 11.7% yoy (USD 126 mln).

Alexander Paraschiy: The main factors in falling exports were declining metal prices at the start of the year, as well as Russia’s canceled FTA with Ukraine, embargo on Ukraine’s food exports and restricted cargo transit through Russian territory. At the same time, goods imports are on a strengthening trend as non-energy imports decreased only 4.3% yoy through the month (compared to -20.4% yoy in December 2015). If not for the dramatic contraction in energy imports, the trade deficit would have widened even further.

We believe the January results will prove to be an outlier to trends, particularly since it marked a period of adjustment after the new restrictions from Russia took effect. Secondly, after the January drop in natural resource prices, they have gradually recovered in February and March. Thirdly, the hryvnia weakened more than 10% since the start of the year in what also should have improved the positions of exporters. Thus, we do not have any reason for the trade deficit widening and we are keeping our projection for a USD 2.1 bln trade deficit in 2016 (according to UkrStat methodology).