Ukraine C/A deficit minor in May on gas imports surge

Ukraine’s current accounts in May resulted in a USD 207 mln deficit after a USD 194 mln surplus the prior month, the National Bank of Ukraine (NBU) reported on July 2. A slowing decline in imports (-6.3% yoy vs. -28.1% yoy a month ago) on the back of almost quadrupled yoy gas imports (3.7 bcm vs. 0.8 bcm a year ago) were the main reasons for the result.



At the same time, the exports decline slowed to -5.0% yoy from -13.6% yoy in the prior month. Strengthened foods exports (+34.5% yoy), as well as a revival of metal exports (+8.0% yoy), were the main factors behind the improvement. Still machinery exports (-14.6% yoy) and chemical exports (-26.4% yoy) kept suffering as a result of the Donbas war.



Financial and capital accounts improved to USD 1.2 bln from USD -426 mln a month ago. FDI finally became modestly positive (USD 7 mln) due to reduced capital outflow. The balance on loans and bonds reached a USD 1.4 bln surplus on the back of a USD 1 billion Eurobond placement and the first wires from the EU and World Bank. Foreign currency outflow from the banking system also was very modest (USD-78 mln vs. USD -186 mln in the prior month).



As a result, the general balance was reported positive USD 1.0 bln for the first time since December 2013 when Russia purchased USD 3.0 bln in Ukrainian Eurobonds. Since Ukraine also received USD 3.2 bln from the IMF (having paid USD 365 mln to the Fund in May), the authorities managed to boost gross foreign reserves by USD 3.7 bln to USD 17.9 bln (2.5 month of imports).



Alexander Paraschiy: External accounts are improving but the total financial picture is not yet complete since exports growth is fragile and the gas price has not been set (authorities are assuming USD 268.5 per tcm). However, we see that capital flows have finally calmed down, which is a convincing sign of stabilization.



Over the upcoming months, we anticipate positive tendencies to only strengthen. The Donabs war poses a threat of exports plunging in red. However, through the summer months we anticipate substantially lower energy imports due Russia’s announced “gas war” and further two-digit decline of non-energy imports on the back of a devaluation effect. Against this backdrop, we see a high chance that the C/A deficit will end up close to USD 3.0 bln, which is 2.3% of GDP.

Источник: Конкорд Капитал