Ukraine’s current account deficit shrinks to USD 0.7bn in June.

By bne IntelliNews August 4, 2013

In June, current account deficit shrank to USD 0.7bn compared to USD 208mn in May and USD 1.6bn seen in June 2012, as the trade balance had improved due to rather small natural gas imports. In H1, current account deficit made up USD 3.7bn versus USD 5.8bn in 2012.

Commodities exports totaled USD 4.9bn in June. Ukraine exported 23mn tonnes of grain crops in the 2012/2013 marketing year, a record- breaking figure over the last four years, although in June 2013 the supply was smaller than in 2012. Export of engineering products was down 26.4% because of cargo railcar flooding into the Russian market. However, Ukrainian producers had managed to switch to the production and distribution of passenger cars.

Export of metallurgical products dropped at 6.0% due to unfavourable conditions on the market of ferrous metals. Commodity import fell by 21.8% to USD 5.8bn in June due to a 3.6 -fold reduction in natural gas supply.

The central bank explains an 11.4% cut in engineering products import by a reduction in motor car supply after customs fee introduction. Commodity import has dropped the second straight month, including import of agricultural products at 2.2% and industrial products at 12.2%.

The central bank noted that the capital and financial account showed deficit of USD 0.4bn in June, that was for the first time since October 2012. The main reason behind was USD 1bn Eurobonds redemption by the government.

At the same time, the capital and financial account has yielded USD 5.9bn surplus in H1 compared with USD 4.7bn in the same period last year. The net inflow of direct foreign investments amounted to USD 0.198bn in June and USD 1.9bn in H1.

Moreover, the NBU has reported UAH 1.1bn negative net liquidity balance in June against USD 514mn surplus in May. The net liquidity balance has produced USD 2.2bn surplus in H1, the regulator noted.

The National Bank (NBU) predicts a consolidated balance-of-payment surplus at this year-end, Serhii Nikolaichuk, an assistant director general of the NBU Economic Department, said. The financial account surplus will completely overturn the current account deficit of the balance of payments by the end of 2013, thus achieving a consolidated surplus of the balance of payments, the NBU estimates.  The current account deficit will narrow at 1.5-2% of GDP in 2013 against 2012, Nikolaichuk said. In the medium term, the NBU plans to follow the trend and reduce the current account deficit to 3-4% of GDP, Nikolaichuk stressed. The reasons for the deficit reduction is the reduction of energy imports in 2013 and a lack of imports of the products imported to Ukraine last year within the preparations for Euro-2012.

Moreover, NBU expects its foreign-exchange reserves to stop falling and at least remain at the current level until the end of 2013 or even increase, since most the payments on the country's external obligations were made in the first half of 2013.


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