National Bank of Ukraine : The Current Account Improved in November Owing to Higher Exports of Food Products and Services

30 December 2016

Press Release

In November 2016, the current account deficit kept narrowing for the second month in a row and amounted to USD 165 million.

• The narrowing of the current account deficit was mainly owing to a substantial increase in merchandise exports (in value terms by USD 343 million) which outpaced the growth in merchandise imports (by USD 281 million).

• In November, Ukraine increased exports of food products. In 2016, Ukraine gathered a record high harvest of sunflower seeds in the history of independent Ukraine. Accordingly, Ukraine has maintained its leading position in the production of sunflower seeds and oil and its position as one of the largest exporters of sunflower oil. In November, in particular, Ukraine's exports of sunflower oil and seeds amounted to USD 700 million, which accounted for 21% of total merchandise exports, having increased by 36% y-o-y. Sugar exports continued to increase last month.

• Overall, the pricing environment for Ukrainian exporters significantly improved. In November, the Ukrainian External Commodities Price Index (ЕСРІ) increased by 6% m-o-m and by 10% y-o-y driven by higher steel and iron ore prices. However, the increase in the ЕСРІ had a limited impact on the balance of payments. The pick-up in global iron ore prices and stronger external demand for iron ore have contributed to the increase in iron ore exports in value terms (by 26% y-o-y and by 15% m-o-m). At the same time, an increase in steel prices had a limited impact on metallurgical exports due to a lag between the production and he shipping of finished goods.

• In addition, November saw an unexpected pick-up in exports of services, reflecting an increase in natural gas transit to the European countries.

• Merchandise imports also rose substantially, primarily driven by higher imports of petroleum products. With the corn harvesting campaign progressing at a fast pace, agricultural firms showed strong demand for petroleum products. Also, machinery imports reported an increase.

In November, net inflows in the financial account declined to USD 84 million compared to October.

• In November, the pace of decline in cash outside banks continued to slow. • In addition, in November, net debt outflows from the real sector reflected significant repayments under trade credits (USD 344 million).

• The redemption by the government of foreign-currency-denominated domestic sovereign bonds held by nonresidents led to a USD 110 million decline in public sector liabilities. • In November, FDI inflows (USD 132 million), were equally distributed between the real and banking sectors. The banking sector received FDI in cash from and through debt-to-equity operations. As a result, the balance of payments recorded a surplus of USD 80 million in November. In January-November 2016, the current account balance recorded a deficit of USD 3.1 billion. However, the current account deficit was offset by net inflows on the financial account (USD 4 billion). As a result, the overall balance of payments recorded a surplus of about USD 987 billion.

The updated data for November 2016 is available underExternal Sector Statistics.

See theMacroeconomic and Monetary Review (November 2016) for greater details on macroeconomic developments in November, which will be published on 30 December 2016.. .