Ukraine Reports BoP Surplus of USD 2.9bn for 2018 (+12% YoY)

February 25, 2019

Ukraine has reported a balance of payments (BoP) surplus of USD 2.88bn for full-year 2018, which is 12% YoY higher than in 2017. Prior years’ data was a surplus of USD 1.30bn for 2016, USD 800mn for 2015, and 2014’s large deficit of USD 13.3bn, according to information from the National Bank (NBU). The country had a current account (C/A) deficit of USD 4.65bn (compared to a deficit of USD 2.44bn for FY17) in the period. Ukraine’s financial and capital account surplus was USD 7.49bn in FY18 (after a surplus of USD 5.0bn in FY17). The NBU reported a decline in foreign direct investments (FDI) into Ukraine by 8.9% YoY to USD 2.36bn in 2018.

Although the country’s current account deficit widened last year and in relative terms reached 3.8% of GDP, Ukraine’s overall exports also grew by 9.5% YoY to USD 59.0bn. In particular, steel product exports rose 15.3% YoY to USD 11.4bn, accounting for 19.3% of total export proceeds. Meanwhile, the food export category demonstrated moderate 4.8% YoY growth to USD 18.6bn. On the import side, a major increase came from automobile and machinery imports, which grew by 18% YoY to USD 16.0bn in 2018. Overall energy imports in Ukraine increased by 15% YoY last year to USD 14.0bn.  
For 2019, we forecast that Ukraine’s C/A deficit will amount to USD 4.1bn (3.0% of GDP), decreasing from last year’s level due to a record high grain harvest in the country for 2018 which should result in grain exports of up to 50mn tonnes in the 2018/19 season. Nevertheless, the main area of concern regarding this year’s BoP is the USD 9.0bn which the Ukrainian government needs to repay to creditors in foreign currency. Currently the BoP gap for 2019 is estimated at USD 4.0bn, which should be covered by USD 2.5bn in IMF loans and an additional USD 1.6bn aid from the EU and other Western partners. This looks quite modest compared to 2018, when Ukraine attracted USD 7.5bn (USD 5.0bn in 2016) on the financial account side, including USD 2.0bn through a Eurobond placement in October.

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