Ukraine current account in red in October

Ukraine’s current account incurred a USD 322 mln deficit (USD 324 mln deficit in 10M15) compared to a USD 135 mln surplus in the prior month, according to a Nov. 30 report by the National Bank of Ukraine (NBU). The result was somewhat better than the USD 396 mln deficit in Oct. 2014 and was driven by accelerating slowing down in imports (-15.4% yoy) compared to exports (-17.3% yoy). Exports of goods declined 23.3% yoy primarily due to mineral products (-37% yoy), metals (-36% yoy), and foods (-12% yoy). Imports of goods fell 21% yoy on food (-36% yoy), chemicals (-21% yoy), machinery (-15% yoy) and minerals (-12% yoy).

Financial accounts improved to a USD 549 mln surplus in October compared to a USD 3.1 bln deficit in the same year-ago month (and a USD 210 mln surplus in the prior month). The key factors in the improved financial flow was a EUR 200 mln loan from Kreditanstalt für Wiederaufbau (KfW), as well as foreign currency returning to the banking system (USD 268 mln vs. USD 316 mln in September).

Ukraine’s general balance in October was reported at a USD 229 mln surplus in what translated into a modest increase in gross international reserves to USD 13.0 bln, which is nearly 3.1 months of imports.

Alexander Paraschiy: The October results are in line with our projections. Current account turned red owing to resumed purchases of natural gas, on the one hand, and sliding resource prices at the global markets on the other. In this context, we are keeping our C/A projection at a USD 1.5 bln deficit (1.7% of GDP) in 2015.

Since no signs of resource market recovery are on the horizon, we expect exports to remain sluggish at least till the mid-2016. At the same time, we expect strengthening of imports on the back of abolished additional import duties (5-10% from imported products) starting Jan. 1. All the trends lead us to conclude that the C/A deficit will widen in 2016 to USD 3.7 bln, which is more than 4% of GDP.

Источник: Конкорд Капитал