Ukraine Doubles BoP Surplus to USD 5.9bn in FY19 After Gazprom Payment

February 10, 2020

Ukraine has reported a balance of payments (BoP) surplus of USD 5.9bn for full-year 2019, which is double the 2018 figure. Prior years’ data was a surplus of USD 2.8bn for 2018 and USD 2.6bn for 2017, according to information from the National Bank (NBU) released last week. The country had a current account (C/A) deficit of USD 1.1bn in the period (co​mpared to a deficit of USD 4.4bn for FY18). Ukraine’s financial and capital account surplus was USD 7.0bn in FY19 (after a surplus of USD 7.2bn in FY18). The NBU reported an increase in foreign direct investments (FDI) into Ukraine by 6.1% YoY to USD 2.5bn in 2019.

Ukraine’s current account improved considerably in December after state-owned energy giant NaftoGaz received a one-time penalty payment of USD 2.9bn from Russia’s Gazprom. As a result, the C/A surplus of USD 2.4bn was registered for the month, offsetting much of the C/A deficit of USD 3.5bn accumulated over 11M19. The biggest single factor supporting the C/A, however, was a heavy flow of remittances from abroad, which reached USD 12.9bn last year (+12% YoY). In relative terms, the C/A deficit for 2019 was just 0.7% of GDP, down from 3.3% of GDP for 2018, although the improvement was almost entirely due to the one-off Gazprom payment (our intitial forecast was a deficit of 1.3% of GDP).
Meanwhile, on the goods & services side, Ukraine’s trade deficit widened by 6.6% YoY to USD 12.1bn last year, as exports growth from Ukraine failed to outpace the import growth.
For 2020, we forecast that Ukraine’s C/A deficit will amount to USD 3.5bn (2.2% of GDP), which would be covered by the expected net FDI of USD 3.0bn and foreign currency borrowings on international markets by both the government and businesses amid the favorable low interest rate environment.

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