Page 30 - bne IntelliNews Ukraine Country Report May 2017

Exports of goods grew 20.9% y/y , benefitting from minerals (+99% y/y), metals (+31% y/y) and food (+16% y/y).
Energy (+54% y/y) and machinery (+22% y/y) underpinned commodity import expansion , which grew 16.7% y/y. Non-energy import growth slowed significantly to 8.0% y/y in February vs. from 21.4% y/y in the prior month.
Financial and capital accounts improved to a $372mn surplus in February
from a $60 mn deficit in the prior month, driven by trade credits ($505mn inflow vs. $193mn outflow in January). However, the result was still lower than the $428mn surplus a year ago. Also individual cash returning to the banking system improved to $292mn from $149mn in January. At the same time, FDI was negligible at $45mn.
General balance (C/A plus capital and financial accounts) was slightly in red at $27mn, keeping gross international reserves almost unchanged at $15.5bn (3.4 months of future imports).
“The February external account numbers show that the impact of the trade blockade of occupied Donbas was not that dramatic,” wote Alexander Paraschiy, an analyst with the Concorde Capital brokerage in Kyiv. “A major part of the export proceeds decline (near two-thirds) was due to lower agri-exports. And a 16.8% y/y export increase is not bad at all. What’s more, the import slowdown has been pulled down by machinery. As a result, the February trade deficit was close to our initial estimate.”
Concorde expects similar tendencies over the upcoming months. Exports will be slowing but will remain in black, underpinned by high metal prices. Imports will be growing on the back of stronger coal but most likely non-energy imports will slow down amid the necessity to rebuild production chains for companies previously linked to Donbas (some investment projects might be delayed). “Against this backdrop, our initial C/A deficit estimate of $5.1bn (or 5.5% of GDP) still looks valid for 2017,” Paraschiy added.
30 RUSSIA Country Report April 2017 www.intellinews.com