Ukraine current account switches to $400mn deficit in February

Ukraine current account switches to $400mn deficit in February
Ukraine’s current account switched to a deficit of $381mn in February vs a surplus of $527m in January / bne IntelliNews
By bne IntelliNews April 1, 2019

Ukraine’s current account switched to a deficit of $381mn in February vs a surplus of $527mn, due to an enlarged trade deficit, the National Bank of Ukraine (NBU) reported on March 29.

The goods trade deficit enlarged to $1.1bn from $235mn in January. In addition, the trade balance in services switched to a deficit of $47mn from a surplus of $67mn in the prior month. In January-February, the current account surplus amounted to $146mn (vs $187mn in January-February).

The merchandise trade deficit surged amid accelerated imports. Goods imports increased 14.9% year-on-year, fuelled by mineral product imports rising 13.8% y/y (vs a 13.1% y/y decline in January). Yet it was machinery imports, which surged 38.9% y/y (vs 21.4% y/y in February), that continued to lead overall import growth.

Meanwhile, goods exports increased by 7.3% y/y in February vs a 9.6% y/y growth in January. Metal exports fell 17.9% y/y vs 7.8% growth in January. At the same time, food exports - the major driving force of Ukrainian exports - accelerated to 26.9% y/y (from 22.9% y/y growth in January). In January-February, goods imports rose 7.4% y/y, while exports grew 8.5% y/y.

January is a good month for trade as Ukrainian companies can use their duty free allowance to export to the EU. However, the quotas are so small that most of this allowance is used by by the end of February. 

The February financial account surplus was $131mn (vs a $590mn deficit in January). In particular, FDI inflow swelled to $369mn (from $168mn in January).

The foreign currency inflow under the short- and long-term loans of the corporate sector amounted to $393mn vs the outflow of $89mn in January. In addition, the foreign currency inflow under the trade credits amounted to $504mn vs the outflow of $730mn in January.

In February, the balance of payments deficit enlarged to $248mn (from $68 mln in January). In January-February, the balance of payments deficit amounted to $316mn (vs a deficit of $196 mln in January-February).

Evgeniya Akhtyrko at Kyiv-based brokerage Concorde Capital wrote in a note on April 1 that the current account switched to a deficit as soon as the growth of goods imports restored itself amid an expected renewal of mineral products imports (apparently, natural gas).

"Goods exports continue to be driven by surging agricultural exports after a record-high grain harvest. Meanwhile, other important export items like ferrous metals and machinery are not likely to demonstrate a confident growth trend in the nearest future," she added.

Concorde expects the current account deficit to enlarge to $5.6bn in 2019 vs $4.5bn in 2018) due to the growing trade deficit.

Data

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