OREANDA-NEWS. February 01, 2011. The balance of payments current account (CA) deficit reached USD 2.6 bln in 2010, or 1.9% of GDP, up from a 1.5% deficit in 2009, according to data released by the National Bank of Ukraine on Friday. The trade balance deficit amounted to USD 3.7 bln or 2.7% of GDP.

Concorde Capital: the 2010 CA deficit was formed in 2H10 (- USD 3.1 bln), driven by the recovery in domestic demand, while in 1H10 the CA saw a surplus of USD 0.5 bln. Furthermore, real UAH appreciation by 6.8% over 11M10 (measured by the NBU through UAH REER dynamics), contributed to the widening CA deficit. At the same time, the net income balance equaled -USD 1.9 mln vs. –USD 2.4 bln in 2009, while net transfers from abroad amounted to USD 3.1 bln, 15% up from 2009. The CA deficit was more than fully covered by net currency inflow through the financial account (FA), which amounted to USD 7.7 bln in 2010 as well as IMF funding of USD 3.4 bln (USD 2 bln of which went directly to the government). The FA surplus was formed through FDI inflow of USD 5.7 bln (plus21% y-o-y) and debt attraction by the government (excluding the IMF) for net USD 5.6 bln. Corporate net debt attraction was within USD 1 bln as the banking sector saw net debt outflow of USD 1.7 bln, offset by inflow into other sectors. Equity portfolio investments amounted to a meager USD 233 mln in 2010 (up 2.3x y-o-y). At the same time, capital outflow through the cash market amounted to a substantial USD 7.3 bln, reflecting both still low (although improving) confidence of households in the hryvnya and increased shadow economy transactions. For 2011, we expect the CA deficit to widen to 2.5%-3% of GDP, more than fully covered by the ~7% FA surplus.