Ukraine C/A switches to surplus in April

Ukraine’s current account switched to surplus (USD 186 mln) in April for the first time in at least two years, the National Bank of Ukraine (NBU) reported on June 2. A much faster imports contraction (-30.0% yoy) compared to slower exports decline (-12.1% yoy) defined the result. Exports suffered primarily from machinery (-22.0% yoy) and metal (-19.4% yoy) declines. Imports fell on the back of drops in machinery (-44.4% yoy), metals (-42.3% yoy), food (-34.8% yoy) and chemicals (-31.4% yoy).

 

Financial and capital accounts were reported in the red (USD-418 mln) in April compared to a USD 56 mln surplus a month ago. Negative FDI (USD -430 mln) was the main reason for the financial outflow. At the same time, cash outflow from the banking system substantially decreased in April to USD 165 mln vs. USD 719 mln in the prior month.

 

The general balance was reported at a USD 232 mln deficit. Redemptions to the IMF (USD 654 mln) also contributed to foreign cash outflow. As a result, by the end of April gross foreign reserves contracted by USD 0.9 bln m/m to USD 14.2 bln (1.9 months of future imports, according to the NBU).

 

Alexander Paraschiy: The April surplus has one big drawback: it was estimated under the assumption that the imported gas price will stay at USD 268.5 per tcm after 1Q14 while the real price has not been agreed with Moscow. Still even if the eventual price is agreed at USD 400 per tcm (on the extreme end), we would still see quite a minor C/A deficit of USD 150 mln, which is in line with our initial expectations.

 

Another disturbing part of the April report is accelerating exports contraction to -12.1% yoy from -0.9% yoy a month ago. In fact, it is much worse than we anticipated and we believe the war in the eastern regions to be the main factor. However, the data excluded Crimea so some part of the exports’ contraction (nearly 1/3) should be attributed to this statistical effect. Despite this, non-energy imports contracting much faster than we estimated (-35.6% yoy) ensured further improvement of the C/A.

 

Amid such tendencies, we do not see any reason to revise our initial C/A deficit forecast (USD 7.1 bln, or 4.7% of GDP). In light of the impressive rates of imports contraction, the C/A deficit might decline further but not sooner than when the Donbas war ends.

Источник: Конкорд Капитал