The National Bank of Ukraine (NBU) expects a significant deterioration in trade indicators in 2022, but with a current account deficit near zero at the end of the year, Deputy Head of the Central Bank Serhiy Nikolaychuk said during a discussion organized by the Center for Economic Strategy (CES).
“So far, given our basic assumptions, we expect the current account deficit to be close to zero throughout this year. But in the memo, take into account that the outflow from the current financial account will be quite significant,” he said.
The deputy head of the National Bank noted that he had questions about the statistics recently published by the Ministry of Economy, in which imports in March fell significantly more than exports. “Based on the payments that we see, we do not see such a sharp reduction in imports and do not see that exports feel much better than imports,” Nikolaychuk stated.
According to him, an important component is the expansion of expenses of Ukrainian citizens abroad, which are not visible in the statistics for imports, but are visible in the payments of Ukrainian banks in foreign currency for Visa and Mastercard settlements. “In the balance of payments, this is an operation that leads to an expansion of the current account deficit,” the deputy head of the NBU explained.
He also clarified that now, when analyzing the current account, it is necessary to take into account that for a month and a half a significant part of imports came as humanitarian or military aid.
“We will see an increase in the trade deficit, but this will be offset by transfers to the secondary income account. That is, free humanitarian aid leads to a neutral impact on the current account,” the deputy head of the National Bank said.
It is also important to keep track of income from IT services, the dynamics of transfers, as there are different scenarios and different opportunities and risks, Nikolaychuk added.
In his opinion, imports will remain suppressed for a sufficiently long period, so the situation with the payment account will not be so bad. “But at the next stage, when we talk about the restoration of the Ukrainian economy after the war, we can count on a greater expansion and current account deficit. But let’s hope for financing from different sources,” the deputy head of the National Bank emphasized.
As reported, the World Bank, in its strongly deteriorated forecast for Ukraine, released this week, expects a current account deficit of 6.8% of GDP this year and its expansion to 16.8% of GDP in 2023.
