Ukraine C/A deficit increases to 1.5x yoy in March

Макроэкономика 30.04.2013 Ukraine’s current account deficit reached USD 964 mln in March 2013, up 48% yoy and flat mom, according to NBU data released on April 29. Both exports and imports of goods declined over the month, -9.7% yoy and -6.4% yoy respectively. Falling exports were led by food (-13.4% yoy), chemicals (-26.5%), metals (-6.2%) and machinery (-16.0%). Shrinking energy purchases (-14.9% yoy) were the key factor in contracting imports. The financial and capital accounts balance was unchanged yoy at USD 1.09 bln in March (USD 1.03 bln a year ago) and twice less than a month ago (USD 2.25 bln). Still, it could have been much worse without state banks’ Eurobond placements (USD 500 mln from Oschadbank and USD 100 mln Ukeximbank) and very low individual demand for foreign currency (just USD 62 mln net). Direct investments also underpinned financial accounts slightly with USD 377 mln net FDI, which is almost twice more than a year ago (USD 202 mln). Ukraine’s general external financial balance (the combined balances of the C/A and the financial account) remains slightly positive at USD 126 mln. Alexander Paraschiy: The March C/A deficit was very close to our estimates, which proves that fundamentals in external trade remain poor. As we anticipated, food exports started falling, although with some delay, due to little grain left over after enormous exports in 2H12. The energy imports slowdown (to -14.9% vs. -39.0% a month ago) was also in line with our anticipation. A decline in non-energy imports (-3.1% yoy) contrasted with our expectations, but it was offset by faster metals, machinery and chemical exports declines (also above our expectations). Against this backdrop, we remain confident that the C/A deficit will keep expanding through the year. Based on assumption that NBU is determined to keep the hryvnia fixed at the expense of new foreign loans, we expect the year-end C/A deficit will reach USD 16.3 bln in 2013 (8.4% of GDP).