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International Reserves Have Increased in Ukraine to $37.8 Billion US

Ukraine's current account deficit in July, according to preliminary data – is $574 million US (compared to $239 million US in July last year). This resulted from a slowdown of exports of goods even amidst a substantial reduction in imports of natural gas. During the first 7 months, the deficit extended to $3.3 billion US (in contrast to a surplus of $313 million US in the same period last year).

Export growth is slowing down significantly for most commodity groups. An annual exports growth rate amounted to 26.4% (compared to 42.7% in June). First of all, this is due to low volumes of exports of agricultural products (1.6% lower than in July 2010). Supplies of new-harvest grain to foreign markets have almost terminated because of some Russian competitors that have entered those markets with dumping prices. Also, due to the ongoing deterioration of the predictions about the world economy, the growth volume for the main groups of Ukrainian exports (in value terms) has slowed: ferrous metals and products thereof – up to 25.1% (in the first half year – 36.0%), chemical products – up to 54.5% (in the first half year – 62.8%), machinery and equipment – up to 29.8% (in the first half year – 36.3%).

The growth rates of imports of goods equaled the corresponding value for exports. The fall of the annual growth rate of imports of goods by 26.3% (compared to 45.3% in June) was primarily due to a sharp reduction in natural gas supplies. The cost of natural gas imports in July was 2.1 times less than the average monthly volumes in the first half, even with substantial price increases. In addition, in July, an annual growth rate of imports of machinery (51.4% compared to 65.0% in June) and the chemical industry declined (12.6% compared to 24.4% in June).

The surplus of the financial and capital account in July was sufficient to fully cover the current account deficit. Formation of the financial account surplus in July in the amount of $682 million US (in contrast to a deficit of $95 million US in June) was achieved primarily through reduction of $684 million US external assets of residents of Ukraine (loans and deposits placed abroad). During the first seven months, the financial account surplus rose up to $5.2 billion US (compared to $4.9 billion dollars US during the same period in 2010).

The consolidated balance of payments in the last few months remains close to zero. In July, the balance returned to positive values of $108 million US (after the trade deficit in June at $376 million US). This enabled to increase international reserves up to $37.8 billion US, which provides funding for a future period imports for 4.5 months.

Source: National Bank of Ukraine