Current account deficit widens; Financial account gap at $600 million; Growth seen at 3 percent, inflation at 9.7 percent; Investment in fixed capital slumps 43 percent; Electricity consumption starts to recover; Ukraine harvests 36.3 million tons of grain.
Current account deficit widens
Ukraine’s current account (C/A) deficit worsened to $355 million in July from $78 million in June due to a higher merchandise trade gap, bringing the January-July deficit to $1.2 billion, still a tremendous improvement over a negative balance of $9.2 billion recorded over the same period last year. Merchandise imports surged by 23 percent month-on-month in July to $4 billion, due to higher gas imports, while exports added only 7 percent, to $3.3 billion, on stronger steel exports.
Financial account gap at $600 million
Ukraine’s financial account deficit stood at $0.6 billion in July, virtually unchanged from June, bringing the January-July deficit to $7.0 billion. On a positive note, net foreign direct investment picked up to $317 million in July (up 33 percent compared to June) while net outflows of debt capital narrowed marginally to $0.8 billion on stronger inflows of new debt to the corporate sector, which offset higher debt repayments in the banking sector. At the same time, purchases of foreign cash by households accelerated to $1.0 billion on a net basis in July from $0.2 billion in June.
Growth seen at 3 percent, inflation at 9.7 percent
The government forecasts real gross domestic product to increase by 3 percent year-on-year and inflation to reach 9.7 percent in 2010. According to unofficial reports, this forecast is based on an average exchange rate of Hryvnia 8.5 to the US dollar and a price of imported gas of $260 per 1,000 cubic meters. The government will use these assumptions to draft the state budget for 2010, with the deadline for submitting the document to parliament set for September 15. On a related note, the International Monetary Fund will send its technical mission to Kyiv in early September to discuss preparation of the 2010 budget. The IMF and Ukrainian authorities earlier agreed to limit next year’s general government deficit to 4 percent of GDP (including deficits of the state budget, the Pension Fund and Naftogaz Ukrainy), which is less than half of this year’s target of 8.6 percent of GDP.
Investment in fixed capital slumps 43 percent
According to the State Statistics Committee, investment in fixed capital, an important measure of investment activity across the economy, slumped by 43 percent year-on-year in January-June to Hr 54 billion following a 40 percent drop in the first quarter. The decline was driven by the industrial and real estate sectors, which together were responsible for more than half of the total slump. The government data also showed private individuals more than halved spending on new apartments and housing construction, to Hr 4 billon, while investment programs financed by companies with own working capital– the largest source of domestic investment – declined by a more modest 27 percent year-on-year to Hr 36 billion. The state budget’s investment expenditures predictably recorded a steep drop of 42 percent to Hr 2.7 billion, becoming comparable in volume terms with foreign investments in fixed capital, which declined by a mere 2 percent to Hr 2.4 billion.
Electricity consumption starts to recover
Electricity consumption in Ukraine produced first signs of recovery in July, increasing by 8 percent compared to June to 10.7 terawatt hours (TWh) and bringing the year-to-date consumption volume to 76.5 TWh (down 15 percent year-on-year). Industrial consumers, households and agriculture drove July’s electricity demand growth, increasing consumption by 8-13 percent. In the industrial sector, metallurgical producers posted the highest consumption growth of 13 percent to 3 TWh, which corresponds to the industry’s 16 percent boost in output last month. Electricity production in July increased by 9 percent month-on-month to 13.5 TWh.
Ukraine harvests 36.3 million tons of grain
Domestic farms have harvested 36.3 million tons of grain crops from more than 13 million hectares (98 percent of this year’s total planted area), posting an average yield of 2.8 tons per hectare, or 20 percent below last year’s average. With only 2 percent of grain crops left to be harvested, the Agriculture Ministry’s earlier forecast of a 42-43 million ton harvest appears unattainable.
