Ukraine's balance of payments deficit more than doubled to $1.882bn in January-June 2017, increasing by almost 2.6 times compared to the same period a year earlier.

In the first half of 2016, Ukraine ran a balance of payments deficit of $727.5mn, according to the State Statistics Service, reported Interfax.

The deficit is rising because of a mild economic recovery following two years of deep economic pain. The economy grew by 2.4% in the first quarter of this year, which was a disappointing result but was caused by the damage done by the economic blockade of the disputed Donbas region.

The deficit total was $551.6mn in June versus $442.2mn in May and $151.4 mn in April.

In January-June of 2017, exports of goods increased by 24.2% (by $4.03bn) compared to the first half of 2016 and amounted to $20.652bn; imports were up by 29.9% ($5.184bn), to $22.534bn.

The ratio of coverage for imports by exports was 0.92 (in January-June-2016 it was 0.96).

The statistics service said foreign trade operations were conducted with partners from 217 countries.

While Ukraine is still trading at a loss the situation is improving slowly thanks to rising commodity prices, on steel, a major export item, in particular.

The current account deficit widened m/m in June, but remains fully covered by capital inflows. Ukraine’s current account gap widened to $0.5bn in June from $0.2bn in May, bringing the the first half of 2017 deficit to $1.6bn, above the $0.9bn gap in the first half of 2016 and equivalent to 4.4% of 12-month trailing GDP, according to the bne IntelliNews monthly country report for July.

At the same time, the financial and capital account (F/A) surplus, net of IMF financing, rose to $0.8bn in June from a slightly revised $0.5bn in May, bringing the the first half of 2017 tally to $2.6bn and the 12-month trailing surplus to $6.4bn or 6.4% of GDP, thus fully covering the current account gap. The overall balance of payments ran surpluses of $0.3bn in June and $2.0bn in the first half of 2017 (NBU).

The m/m current account deterioration in June was caused by a drop in food & agriculture exports and a worsened income balance. Still, exports grew a strong 21% y/y in the first half of 2017 (to $25bn), fueled by food, steel and iron ore exports.

Agricultural exports were driven by higher volumes of grain and vegetable oil following an abundant harvest in 2016. At the same time, growth in metal and iron ore exports mostly resulted from higher prices (hot rolled coil averaged $466/t in the first half of 2017, up 32% y/y), fully offsetting a decline in volumes caused by the severing of economic ties with separatist-held territory in Donbas.

Imports also expanded strongly (+20% y/y to $28bn in the first half of 2017), led by energy and machinery purchases. Fuel and mineral imports surged 75% y/y to $5.3bn on account of much higher gas purchases (7.0 bcm in the first half of 2017 vs. 3.0 bcm in the first half of 2016) and higher global oil, gas and coal prices. Machinery imports jumped by 39% y/y to $6.1bn in the first half of 2017, reflecting the continued expansion of domestic investment demand.

FDI accelerated to $0.6bn in June thanks to $0.4bn of debt-to-equity swaps in the banking sector. Still, total FDI slowed sharply to $1.2bn in the first half of 2017, down 46% y/y on account of reduced bank debt-to-equity swaps, with FDI in the real sector actually doubling y/y to $0.7bn.