Ukraine's current account deficit shrinks to $0.7bn in October

Ukraine's current account deficit shrinks to $0.7bn in October
Ukraine’s current account (C/A) deficit shrank to $0.7bn in October from $1.1bn in September
By bne IntelliNews December 2, 2019

Ukraine’s current account (C/A) deficit shrank to $0.7bn in October from $1.1bn in September due to a positive switch in the primary income balance, the National Bank of Ukraine (NBU) reported on November 30.

Primary income switched to a $385mn surplus from a $102mn deficit in September on a decrease of coupon payments on international Eurobonds.

The trade deficit (goods and services) swelled to $1.4bn from $1.3bn due to a deteriorated balance of trade in goods. In 10M19, the C/A deficit amounted to $3.4bn (vs. $4.1bn in 10M18).

In October, the goods trade deficit swelled to $1.52bn from $1.45bn in September. Goods exports slowed to 7.1% y/y growth to reach $4.2bn (vs. a 12.3% y/y surge in September).

Goods imports increased 2.9% y/y to $5.7bn (keeping the same growth rate as in September). The weaker export growth was mostly due to slower growth of food exports (22.3% y/y in October vs. 29.4% y/y growth in September) and a drop in exports of mineral products (14.4% y/y decline in October vs. 15.2% y/y growth in September).

The relatively slow growth of imports was prompted by mineral products, which declined 9.1% y/y in October. In addition, chemical imports dropped 6.4% y/y in October (vs. 3.7% y/y growth in September). Meanwhile, machinery imports stayed strong, surging 19.4% y/y in October.

The financial account surplus contracted to $0.5bn from $1.2bn in September. In particular, net foreign currency outflow from the banking sector amounted to $145mn (vs. net inflow of $225mn in September). In addition, the purchase of foreign currency by the population in October rose to $541mn (from $287mn in September).

Ukraine’s balance of payments switched to a $146mn deficit in October from a $60mn surplus in September. In 10M19, the balance of payments surplus amounted to $2.1bn (vs. a $0.3bn deficit in 10M18).

“The slow growth of merchandise imports – amid dropping spending on energy imports – is keeping C/A deficit growth in moderation. Meanwhile, the growth of merchandise exports slowed down owing to weakening grain exports,” Evgeniya Akhtyrko of Concorde Capital said in a note. “We are improving our 2019 C/A deficit forecast, revising it downward to $4.5bn from $5.4bn, mainly because of the lower-than-expected growth of merchandise imports.”