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Weekly Insight -- Financial account significantly negative

In January, Ukraine’s financial account turned significantly negative while the current account balance improved markedly.

The current-account deficit improved to US$0.5bn in January thanks to a better balance of trade in goods. Export of goods was up 12% YoY while imports surprisingly declined 1%. The balance of trade in services was little changed in December, but improved substantially vs January 2023, which reflects a decline in expenditures of Ukrainian refugees abroad. Migrant incomes fell 17% YoY, but still offset more than a third of the trade deficit. Transfers to government were insignificant as Ukraine did not receive any new grant funding from the US.

The financial account was negative at US$1.4bn, the largest deficit since September 2022. FX cash outflows from banks (the largest channel of private capital flight) increased in January, while flows through other channels remained little changed. Unlike in previous months, Ukraine did not receive any sizeable loans in January 2024, as Ukraine’s allies were finalizing formalities to unlock funding in the following months.