In November, Ukraine’s current account deficit declined to $414mn from $515mn in October and from $1.1bn in November 2013, according to a National Bank of Ukraine (NBU). The reduced deficit was caused by a somewhat stronger imports decline (-33.7% y/y) compared to a bit slower exports contraction (-30.4% y/y) in November.

Merchandise imports declined mostly due to falling energy imports (-33.7% y/y), mainly oil. Other declines occurred in food (-42.3% y/y), machinery (-37.1% y/y), and chemicals (-30.6% y/y). Merchandise exports fell on the back of mineral products (-42.1% y/y), machinery (-31.9% y/y), metals (-29.3% y/y), and food (-20.1% y/y). In January-November, the CA deficit reached $4.5bn, down 3.3-fold y/y ($14.7bn in January-November 2013).

Financial and capital accounts were reported to be running $2.2bn deficits in November compared to a $3.0mn deficit in October ($0.5bn surplus in November 2013). External redemptions to Gazprom on gas debt ($1.45bn), 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 positive ($0.08bn) in November and foreign currency withdrawal from the banking system stopped as the central bank reported $0.03bn inflow for the first time since June. The general balance was seen at a $2.6bn deficit in November, which transformed into a 20.6% gross international reserves decline to $10.0bn as of end-November (1.9 months of future imports).

Concorde Capital expert Alexander Paraschiy said that exports fell much faster in November than was expected, due to the worsening economic situation. This trend is the main reason why Concorde Capital is once more revising its C/A deficit estimate for 2014, which was anticipated to reach $4.5bn (3.4% of GDP) by the end of December. The new estimate is $5bn in the 2014 C/A deficit (4.0% of GDP).

For 2015, Concorde Capital forecasts the C/A deficit narrowing on the back of further weakening of the hryvnia, which has already declined to near 18-19 UAH/$ from nearly 16 UAH/$ in November. What's more, parliament approved new taxes on imports (5-10%) for 2015 which will add extra pressure in the next 12 months, he added. At the same time, Paraschiy expects the declining rates of exports to slow down to near -12.0% y/y in 2015 vs. -19.5% y/y 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, he summed up.