Ukraine trade deficit widens in October on exports drop

Ukraine’s trade deficit surged 25.3% yoy to USD 1.8 bln in October vs. USD 1.4 bln a year ago, according to state statistics released on December 13. Exports declined 10.5% yoy while imports fell 3.8% yoy in October. In 10M13, the trade deficit reached USD 11.5 bln, which is USD 1.2 bln less than the same year-ago period (USD 12.7 bln for 10M12).

Alexander Paraschiy: Falling railcar (-49.1% yoy), chemical (-41.8% yoy), grains (-15.8% yoy), and machinery equipment (-11.9% yoy) exports were the key factors in the trade deficit growth in October. Imports fell on the back of vehicle (-20.1% yoy) and machinery equipment contraction (-7.2% yoy). However, increased natural gas imports (+10.0% yoy) and tripled imports of petrol limited the imports decline.

In November-December, we anticipate a further contraction in exports since external demand for Ukrainian products does not seem to be reviving, particularly with Russia continuing to impose trade restrictions. What’s more, the current political turmoil might make foreign partners think twice before closing contracts with Ukrainian firms.

We expect imports to drop less dramatically due to intensive energy imports. In November, the energy bill most likely will be less than a year ago with the Ukrainian government taking a pause after Gazprom required payment for gas supplied in August and October. However, December’s cold weather has probably spurred the authorities to boost energy imports, which should be reflected in the year-end statistics. Thus, we are keeping our initial trade deficit forecast at USD 14.5 bln in 2013 (-9% yoy), according to UkrStat methodology.