Ukraine’s current account went into a $837mn surplus in April from deficit in March

Ukraine’s current account went into a $837mn surplus in April from deficit in March
Booming commodity prices helped push Ukraine's current account to a healthy surplus in April from a deficit the month before.
By bne IntelliNews June 2, 2021

Ukraine’s current account (C/A) switched to a surplus of $837mn in April, from a $333bn deficit in the prior month, due the positive balance in trade and primary income, the National Bank of Ukraine (NBU) preliminarily reported on May 31.

“Ukraine’s external trade continued to boom in April, and the reinforced quarantine restrictions during the month apparently were not an obstacle. The export receipts are ballooning amid an incredibly favourable global price situation for iron ore and ferrous metals. The growth of other Ukraine’s export items is also strong, and this is not only the result of the low comparative base of the previous year,” Evgeniya Akhtyrko of Concorde Capital said in a note.

The goods trade deficit shrank to $190mn from $931mn, while the surplus of trade in services stayed almost flat at $501mn. The primary income balance switched to a surplus of $197mn, from a deficit of $312mn in the prior month, due the decline in payments on investment. The surplus of the secondary income declined to $329mn from $410mn in the prior month.

In 4M21, the C/A surplus amounted to $1.1bn (vs. a $3.5bn surplus in 4M20).

Goods imports surged 54% year on year to $5.1bn in April (vs. 26.3% y/y growth in March). In particular, imports of machinery jumped 83% y/y, imports of mineral products advanced 45% y/y, chemical imports increased 38% y/y. Imports of foods added 30% y/y.

Goods exports advanced 35% y/y (vs. 24% y/y growth in March) to $4.9bn, renewing the previous month’s record-high since 2014. The growth was mostly driven by a surge in exports of ferrous metals (65% y/y) and mineral products (77% y/y). In addition, exports of chemicals jumped 39% y/y, machinery exports advanced 23% y/y and food exports added 9% y/y.

The financial account was almost balanced out in April with a minor deficit of $43mn, vs a deficit of $382mn in March. In particular, the net foreign currency inflow from the operations of the government sector amounted to $941mn, reflecting the receipts from the placement of international Eurobonds for $1.3bn. At the same time, the net outflow under the trade loans amounted to $664mn, and the net outflow from the banking sector was $203mn.

The surplus of Ukraine’s balance of payments amounted to $795mn in April (vs. a $713mn deficit in March).

In 4M21, the deficit of Ukraine’s balance of payments amounted to $166mn (vs. a surplus of $577mn in 4M20).

“Goods imports in money terms in April were lower than the March peak. However, the demand for imports is recovering quickly. This trend is not intimidating as long as the price situation at the external markets for Ukraine’s exports remains favourable. However, if the latter changes, we might see a faster enlargement of the goods trade balance resulting in worse C/A balance than we currently expect,” Akhtyrko added. “According to our forecast, the surplus of Ukraine’s C/A will amount to $0.5bn (vs. a $6.2bn surplus in 2020).”