Ukraine budget deficit falls 2.3x in 4M14 on NBU support

Ukraine budget deficit falls 2.3x in 4M14 on NBU support



29 травня 2014 года
Конкорд Капитал

Ukraine’s budget deficit reached UAH 2.7 bln in April and UAH 6.7 bln in 4M14, the Finance Ministry reported on May 28. The 4M14 deficit more than halved yoy, compared to UAH 15.6 bln for 4M13.



Alexander Paraschiy: The reduced state deficit would have been good news if not for what was behind the narrowing. The MinFin report revealed that advanced wires of NBU profits to the budget (UAH 19.8 bln for 4M14 vs. UAH 4.0 bln in the same year-ago period) played a critical role in the final result. If NBU support was flat yoy, we would have seen a fiscal gap of UAH 22.5 bln in 4M14, or 44.5% higher than a year ago.



This trend looks quite alarming. Taxes on consumption suffered the most as retail demand has plummeted due to hryvnia devaluation and the armed conflict in the east. Accelerated inflation has not helped to cover the decline in real consumption, as reflected in statistics so far. Without the NBU support, budget revenue would have been 1.3% yoy less for 4M14. If this trend in tax collections is maintained in 2H14, budget revenue from taxes might be UAH 30-40 bln below the full-year target, which is not a picture the IMF would be pleased to see.



Against this backdrop, we are keeping our forecast for the 2014 state budget deficit at UAH 63.8 bln, or 4.2% of GDP, since MinFin is unlikely to violate its commitment to the Fund. In light of the negative tendency, this target could be reached either with the accumulation of arrears or if the authorities truly start fighting tax evasion schemes.

Источник: Конкорд Капитал

Аналитик: Александр Паращий
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