Ukraine goods trade reaches USD 332 mln surplus in July

Макроэкономика 16.09.2014 Ukraine’s goods trade balance reached a USD 332 mln surplus in July compared to a USD 1.7 bln deficit a year ago, according to a Sept. 15 Ukrstat report. Exports dropped only 5.9% yoy to USD 4.8 bln, weighed down by declines in transportation vehicles (-67.2%) and chemicals (-35.1% yoy). At the same time, food exports jumped 28.0% yoy due to growth in grains. Imports slumped 33.8% yoy to USD 4.5 bln in July with the energy sector as the main cause (-42.2% yoy). Other sectors have been also been sliding, led by transportation vehicles (-57.2% yoy), metals (-39.7% yoy), chemicals (-25.5% yoy) and machinery equipment (-24.3% yoy). On a regional basis, Russia was responsible for the exports drop (-25.7% yoy in July) since non-Russian markets continued growing (+1.0% yoy). For 7M14, the trade balance reached a USD 880 mln surplus vs. USD 5.6 bln deficit a year ago. Exports of goods declined 5.3% yoy while imports plummeted 20.5% yoy in the period. Alexander Paraschiy: The July statistics are rather positive. However, the bigger source of concern is August, when the warfare in the Donetsk and Luhansk regions (collectively known as Donbas) intensified with subsequent devastation to production capacities. Given the continued ForEx turmoil, we assume exports declined significantly in August but so far we do not have any data to gauge the scale. After August’s devaluation of the local currency from UAH 12/USD to a nadir of UAH 14/USD, we anticipate the imports decline will still be higher in September than the fall in exports due to warfare. For instance, already in July, non-energy imports plummeted 30.0% yoy and we expect the drop will be even stronger in August. Against this backdrop, we are keeping our trade deficit forecast (according to Ukrstat methodology) near USD 1.0 bln in 2014 vs. USD 13.7 bln a year ago.