Ukraine trade deficit surges 6x in January, bringing C/A to deficit

2018/3/7 0:49:25

Analyst: “So far, January's external accounts alone do not provide us with enough grounds to adjust our projections for the C/A deficit at USD 4.2 bln, or 3.6% of GDP in 2018.”

 

 


KYIV, Mar 6, 2018 - Ukraine’s trade deficit amounted to USD 373 mln in January, surging 6 times from USD 62 mln a year ago and following a 29.5% yoy rise in December, Concorde Capital informed clients based on an NBU report on Feb. 28. Import growth of 26.7% yoy outpaced export growth of 19.0% yoy, turning the current account (C/A) to a deficit of USD 61 mln compared to a surplus of USD 131 mln a year ago. Positive balances in primary income (USD 4 mln) and secondary income (USD 308 mln) was not enough to compensate the trade deficit.

 

 

The growth in goods exports accelerated to 22.4% yoy from 18.7% yoy in December, led by metals, mineral products (including ores), and machinery. The boost in goods imports to 30.5% yoy from 23.5% yoy in December was mostly due to non-energy products, including chemicals, machinery, and foods.

 

 

The financial and capital accounts turned to a USD 388 mln deficit in January from a surplus of USD 713 mln in the prior month (and deficit of USD 335 mln a year ago). The repayments on long-term loans of the non-banking sector (USD 230 mln outflow from USD 266 mln inflow in December) and trade credits (USD 204 mln outflow from USD 91 mln outflow in December) outweighed the FDI inflow of USD 80 mln (USD 233 mln in December) and portfolio investment of USD 111 mln (USD 22 mln in December).

 

 

A short depreciation of the local currency by 3.2% m/m during January fostered the sale of cash currency by individuals. For the first time since September, the monthly sale of cash currency by individuals exceeded currency purchases, resulting in currency inflow of USD 189 mln.

 

 

In January, the deficit of combined balance (C/A plus capital and financial accounts) more than doubled to USD 449 mln from USD 202 mln a year ago (a USD 1 mln surplus in December). The deficit led to a decline in gross international reserves by 2.0% m/m to USD 18.6 bln (3.5 months of future imports).

 

 

Concorde analyst Evgeniya Akhtyrko added: “The next three months should reveal if January’s spike in imports of non-energy goods turns into a trend. Amid the country’s weak export potential and sketchy currency inflow under the financial account, fast growing imports will result in a shakier BoP and put more devaluation pressure on the Ukrainian currency. So far, January's external accounts alone do not provide us with enough grounds to adjust our projections for the C/A deficit at USD 4.2 bln, or 3.6% of GDP in 2018.”

 

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For more information, link here: www.concorde.ua 

 

 

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