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5.2 Balance of payments, current account
Ukraine’s current account (C/A) deficit declined to $863mn in October
from $1.6bn in September, the National Bank of Ukraine (NBU) reported on November 30. The primary income balance switched to a $449mn surplus from a $218mn deficit in the previous month. In 10M18, the C/A deficit amounted to $4.6bn (vs. $1.7bn in 10M17).
“The trade deficit didn’t change much in October, staying at $1.7bn, the highest since December 2013,” of Concorde Capital said in a note.
Goods exports picked up 11.0% y/y (vs. a 3.2% y/y decline in September). In particular, food exports surged 15.8% y/y (vs. a 9.8% decline in September). At the same time, metals exports slowed to 3.2% y/y growth (vs. 8.3% growth in September).
Meanwhile, goods imports accelerated to 22.2% y/y growth (from 16.1% y/y growth in September). Imports of machinery accelerated to 34.0% y/y growth (from 22.6% y/y growth in September). Imports of metals increased 31.9% y/y (vs. 7.5% y/y growth in previous month).
In 10M18, goods imports rose 16.0% y/y, while exports grew 10.0% y/y.
Following the clash in the Sea of Azov with Russia on November 25 it is reported that no ships have docked in the two main Ukrainian ports in the sea and that this will restrict exports if access to these key ports is not granted again soon. However, it is still too early for the fracas to show up in the trade data.
The financial account surplus in October amounted to $1.0bn, unchanged from the previous month. The net foreign currency inflow to the banking sector reached $259mn (vs. $84mn of net outflow in September). Like in the previous month, the net inflow under trade credits was high at $632mn (compared to $858mn in September), reports Concorde.
In October, the surplus of both the financial and capital accounts surpassed the current account deficit, bringing Ukraine’s balance of payments to a surplus of $164mn. In 10M18, the deficit of balance of payments amounted to $254mn (vs. a surplus of $2.1bn in 10M17).
“Fast-growing imports resulted in the C/A deficit swelling. We expect goods exports to pick up somewhat by the year end amid accelerated food exports. However, it will not be enough to avoid further enlargement of the current account. We estimate the C/A deficit to reach $5.1bn (around 4% of GDP) in 2018. The swelled C/A deficit should inevitably result in a new round of hryvnia exchange rate "adjustment”,” Evgeniya Akhtyrko of Concorde Capital said in a note.
C/A gap widens on accelerated imports in the third quarter. In 3Q18, the current account deficit nearly tripled y/y to $3.5bn. The 12-month trailing deficit is $4.8bn, nearly 3.7% of GDP. The widening of the C/A gap in recent months is related in large part to greater imports of consumer goods. Importers have increased purchases in anticipation of a seasonal depreciation of the hryvnia – typical for the 4Q. This, in turn, shifted the weakening of the hryvnia to the
35 UKRAINE Country Report December 2018 www.intellinews.com