Ukraine current account deficit reaches USD 4.5 bln in 11M14

Ukraine’s current account (C/A) deficit declined to USD 414 mln in November from USD 515 mln in October and from USD 1.1 bln in November 2013, according to a National Bank of Ukraine (NBU) report released on Dec. 26. The reduced deficit was driven by a slightly stronger imports decline (-33.7% yoy) compared to a bit slower exports contraction (-30.4% yoy) in November.



Goods imports fell largely owing to falling energy imports (-33.7% yoy), mainly oil. Other declines occurred in food (-42.3% yoy), machinery (-37.1% yoy), and chemicals (-30.6% yoy). Exports slid on the back of mineral products (-42.1% yoy), machinery (-31.9% yoy), metals (-29.3% yoy), and food (-20.1% yoy).



For 11M14, the C/A deficit reached USD 4.5 bln, which is 3.3x times less than a year ago (USD 14.7 bln for 11M13).



Financial and capital accounts were reported at a USD 2.2 bln deficit in November compared to a USD 3.0 mln deficit in the prior month (and vs. a USD 0.5 bln surplus in November 2013). External redemptions to Gazprom on gas debt (USD 1.45 bln), as well as a reduced level of private debt rollover (to 82% from 87% in October), were the main reasons for the high monthly deficit.



FDI still remains modestly positive (USD 0.08 bln) in November and foreign currency withdrawal from the banking system stopped as the central bank reported USD 0.03 bln inflow for the first time since June. The general balance was reported at a USD 2.6 bln deficit in November (USD 3.5 mln in the prior month), which translated into a 20.6% gross international reserves decline to USD 10.0 bln as of end-November (1.9 months of future imports).



Alexander Paraschiy: Exports are falling much faster in November than we expected on the back of the worsening economic situation. This trend is the main reason why we are once more revising our C/A deficit estimate for 2014, which we anticipated to reach USD 4.5 bln (3.4% of GDP) by the end of December. Our new estimate is USD 5 bln in the 2014 C/A deficit (4.0% of GDP).



For 2015, we anticipate the C/A deficit narrowing on the back of further weakening of the hryvnia, which has already declined to near 18-19 UAH/USD from nearly 16 UAH/USD in November. What’s more, parliament approved new taxes on imports (5-10%) for 2015 in what will add extra pressure in the next 12 months.



At the same time, we anticipate the declining rates of exports to slow down to near -12.0% yoy in 2015 vs. -19.5% yoy expected in 2014. Stabilized exports of services is the main reason for such expectations, while commodity exports will keep falling at the same rates, given the aggravated situation in the Russian market and the region as a whole. All in all, we anticipate the 2015 C/A deficit to narrow to USD 1.1 bln, which would be 1.1% of GDP.

Источник: Конкорд Капитал