Ukraine's trade regime remains unbalanced, but other income covers the shortfall

Ukraine's trade regime remains unbalanced, but other income covers the shortfall
Ukraine's current account turned from a $462mn deficit in March to a surplus of $249mn in May.
By bne IntelliNews June 30, 2019

Poland overtook Russia to become Ukraine’s biggest trade partner in May and maintained its lead in April (the most recent month of data), accounting for about 15% of trade amongst Ukraine’s top 15 trade partners. All-in-all Russia’s share in Ukraine’s trade continues to sink slowly, down from circa 9% to just over 6% in April y/y, although Russia remains easily the second largest trade partner.

Another big change in the trade regime is the appearance out of nowhere of China that is now Ukraine’s third largest trade partner.  China’s trade has been almost doubling every month this year rising from $160mn in January to $313mn in February, $640mn in March and was $916mn in April, according to the official statistics.

Ukraine has been very slow to tie up with the Chinese who have been investing heavily throughout the region (and especially in Russia and Belarus) but it seems Kyiv is on the bandwagon now. While it seems certain that Sino-Ukrainian trade will top $1bn this year and probably end closer to $2bn, that is still well behind the Russians which have $100bn of trade turnover and are on course to hit $200bn in the next few years.

Overall Ukraine’s trade is growing but Ukraine continues to run a sizable balance of payments deficit, which shrank slightly in April to $609mn from January's $825mn. However, with a fifth of the population working abroad the circa $10bn they send home a year easily covers the deficits so the current account has returned to the black over the last two months despite the fact that import growth is running faster and is bigger than exports in both regards. 

Ukraine's goods trade deficit reached $600mn in April. The goods trade deficit reached $609mn in April, decreasing from $645mn in March, the State Statistics Service said in its preliminary report on June 14. The seasonally adjusted goods trade deficit amounted to $924mn (staying close to the $916mn deficit in March) amid 0.6% m/m growth in adjusted exports and a 0.6% m/m increase in adjusted imports.

In 4M19, the trade deficit reached $2.1bn, swelling 45.2% y/y. In 4M19, goods exports advanced 6.0% y/y to $16.4bn. Meanwhile, goods imports rose 9.3% y/y to $18.5bn. The agricultural sector remained the major contributor to export growth. In particular, grain exports surged 46.4% y/y and finished food product exports picked up 13.0% y/y. In addition, exports of mineral products increased 12.8% y/y. At the same time, exports of ferrous metals and machinery declined 8.8% y/y and 5.6% y/y, respectively.

However, thanks largely to remittances and bond issues the current account turned from a $462mn deficit in March to a surplus of $249mn in May. The trade regime remains unbalanced as Ukraine is not exporting enough but it has for the meantime other sources of income to cover the shortfall.

 

This article is from bne IntelliNews Ukraine monthly country report. Sign up to receive the report to your inbox each month, which covers the slow moving macro- and micro-economic trends, the major political news and a round of the main sectors and corporate news. First month is free and you can unsubscribe at anytime.

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