Ukraine goods trade reaches USD 308 mln surplus in August

Макроэкономика 16.10.2014 Ukraine’s goods trade balance was reported at a USD 308 mln surplus, compared to a USD 1.7 bln deficit a year ago, according to state statistics released on Oct. 15. For 8M14, the trade balance was a USD 1.2 bln surplus compared to a USD 7.3 bln deficit a year ago. In August, exports slumped 16.9% yoy on the back of falling production of vehicles (-61.3% yoy), chemicals (-44.2% yoy), machinery equipment (-28.4% yoy) and metals (-10.7% yoy). Imports plunged (-42.0% yoy) due to contracted demand for energy (-49.5% yoy), vehicles (-77.4% yoy) and machinery equipment (-34.6% yoy). Falling supplies to Russia (-39.2% yoy in August) remained the key factor in exports contraction, yet exports to non-Russian markets also fell (-10.2% yoy) in August. Alexander Paraschiy: Despite the declines, the August trade statistics turned out much better than we expected. Aggravated warfare near Donetsk, with the subsequent occupation of parts of the Luhansk and Donetsk regions, seemed to promise a dramatic worsening of the trade balance on the back of an exports plunge. However, as we see from the official statistics, goods imports declined much stronger than exports in securing the steady trade surplus, according to Ukrstat methodology. To some extent, a new wave of hryvnia devaluation (reaching UAH 14/USD after UAH 12/ USD in the prior month) was responsible for such a result. However, halted imports to the occupied region, as well as a dramatic decline in natural gas imports owing to the current gas war with Russia, proved to be much more important factors in the trade balance. Given that the August statistics exceeded expectations and external accounts shouldn’t become aggravated, we are improving our trade balance forecast for 2014 (according Ukrstat methodology) to a USD 1.0 bln trade surplus, compared to a USD 13.7 bln trade deficit a year ago (the estimate is adjusted for market gas prices in 2Q14).