Ukraine reports record high C/A surplus in June

Ukraine’s current account (C/A) was in USD 361 mln surplus in June 2015, compared to USD 528 mln deficit a year ago. In fact, that high surplus had not been observed since January 2011. Significant improvement of exports to -28.2% yoy (vs. -38.8% yoy in May 2015) was the key reason for the outcome. Imports also strengthened but not that fast: to -36.7% yoy in June vs. -42.1% yoy in May.  Exports of goods improved mainly due to growing grain supplies: foodstuff exports increased 9.3% yoy in June vs. a 27.4% yoy decline in May. At the same time, all other key export items kept falling: metals -47.3% yoy, mineral products -44.9% yoy and machinery -43.9% yoy.  Imports of goods were declining mainly due to sliding energy bill (-39.3% yoy), falling machinery imports (-37.8% yoy) and decreasing chemical imports (-27.4% yoy).

Financial accounts were only modestly positive in June 2015 (USD 80 mln) though much better than USD 607 mln deficit a year ago.  Continued FDI inflow (USD 437 mln), returning foreign cash from individuals to the banking system (USD 227 mln) as well placement of state local Eurobonds (USD 140 mln) through the month are seen as the main factors that secured slight financial accounts surplus.

General balance reached USD 489 mln surplus in June which made Ukraine’s gross international reserves growing to USD 10.3 bln (2.2 months of future imports).

Alexander Paraschiy: The June result implies that the 1H15 C/A was in USD 16 mln surplus. The result looks encouraging, but we have to keep in mind that in 2H15 imports will benefit from hryvnia stability and we should be ready for strengthening imports supplies. On the other side, we do not expect exports improving fast given sluggish performance of regional economies including Russia.  These tendencies make us keep our C/A forecast at USD 1.7 bln deficit (-2.1% of GDP).