Ukraine current account balance falls almost even in May

Макроэкономика 01.07.2015 Ukraine’s current account balance was reported slightly negative in May 2015 at a USD 10 mln deficit, compared to a USD 395 mln deficit in the same year-ago month. Imports plunged 42.1% yoy (compared to -38.2% yoy in April) while exports fell 38.8% yoy (-36.4% yoy in April). Imports of goods dropped 45.2% yoy on the back of shrinking food (-45.7% yoy), machinery (-44.5%) and chemicals (-35.6%), as well as a declining energy bill (-44.4% yoy). Exports of goods plunged 42.3% yoy owing to contracting mineral products (-60.7% yoy), metals (-49.3% yoy), machinery (-47.9% yoy), chemicals (-46.1% yoy) and food (-27.4% yoy). Financial and capital accounts reached a USD 330 mln surplus in May compared to a USD 1.4 bln surplus in the same year-ago month. Net FDI was positive (USD 363 mln) through the month. Portfolio investments grew USD 918 mln on the back of a USD 1.0 bln Eurobond placement. However, other investments were deeply in red (USD 1.0 bln deficit) primarily due to commercial bank redemptions (USD 0.9 bln). At the same time, foreign cash kept flowing into the banking system (USD 248 mln in May). The general balance in May switched to a surplus (USD 320 mln), thus contributing to gross international reserves improving to USD 9.9 bln (nearly two months of future imports). Alexander Paraschiy: External accounts are developing better than we expected. The trade balance keeps fluctuating near zero and capital flow is coming from international support. For 5M15, the NBU reported a USD 345 mln C/A deficit, which means that the external trade deficit will be much lower than we initially predicted for the next 12 months. Against this backdrop, we are revising our C/A forecast to a USD 1.1 bln deficit compared to USD 1.7 bln estimated previously.