Ukraine C/A deficit in October flat m/m at USD 0.6 bln

Ukraine’s current account deficit was USD 634 mln in October compared to a USD 660 mln deficit in the prior month, reported on Nov. 27 the National Bank of Ukraine (NBU). At the same time, it was 3.3x less than a year ago (USD 2.1 bln in October 2013). What secured the result was a stronger imports decline (-37.2% yoy) compared to weaker exports contraction (-27.6% yoy). In 10M14, the C/A deficit reached USD 4.0 bln, which is 3.4x times less than a year ago (USD 13.5 bln).



In October, goods imports have been contracting primarily on the back of an energy bill plunge (-43.2% yoy) and machinery imports slump (-40.4% yoy). Goods exports have been falling in most key categories, including mineral products (-43.1% yoy), machinery (-40.4% yoy), metals (-25.3% yoy) and food (-15.0% yoy).



Financial and capital accounts worsened to a USD 2.9 bln deficit in October compared to a USD 302 mln surplus in the prior month (and a USD 1.6 bln surplus in October 2013). A repayment of Naftogaz Eurobonds (USD 1.6 bln) was the main reason for the capital outflow. Panic at the ForEx market also contributed to such a poor outcome: USD 503 mln was withdrawn from the banking system in October, which was twice more than in the prior month (USD 225 mln). At the same time, net FDI inflow remained modestly positive (USD 151 mln) through the month.



The general balance was reported at a USD 3.5 bln deficit in October (USD 358 mln deficit in the prior month), which is what secured a 23.2% gross international reserves decline to USD 12.6 bln (2.2 months of future imports, we estimate).



Alexander Paraschiy: External accounts continued developing somewhat worse than we expected owing to a stronger decline in exports despite substantial devaluation since the year start. After the latest wave of hryvnia devaluation in November, imports will decline even stronger in the last two months of the year. We believe the 2014 C/A deficit will be somewhat higher than the USD 4.1 bln we previously estimated for 2014. Even if exports do not sink deeper, we wouldn’t expect the C/A deficit to be less than USD 4.5 bln, which is 3.4% of GDP.



In regards to 2015 prospects, unless devaluation continues, we can hardly avoid resumed C/A deficit widening. Exports will be growing slowly and as soon as the economic situation stabilizes, consumer and investment imports will rebound quite fast. Against this backdrop, we project the C/A deficit will reach 5.0% of GDP next year.

Источник: Конкорд Капитал