Ukraine general budget reaches surplus in July

kraine’s general budget revenue surged 70% yoy in July compared to 47% yoy growth in the prior month. Spending also sped up to 31% yoy compared to 22% yoy in June. As a result, the general budget balance in July switched to surplus yet again (UAH 2.9 bln, net of state lending), making for a UAH 16.3 bln surplus (net of state lending) for 7M15 (UAH 13.4 bln for 1H15). The central budget deficit narrowed to UAH 0.5 bln in July compared to a UAH 7.3 bln deficit in the prior month. For 7M15, the central budget deficit reached UAH 1.4 bln (net of state lending).

The impressive July fiscal results stemmed from central bank spending (UAH 6.2 bln more yoy), a slump in VAT reimbursements (by UAH 3.7 bln yoy) as well as trippled revenue from mineral extraction tax (up UAH 3.0 bln yoy). At the same time, substantial slowing occurred in gross VAT collections (to 17% yoy compared to 30% yoy in the prior month) and collections of the enterprise profit tax (down 40% yoy compared to a 10% yoy growth in June). Other key budget revenue sources maintained high growth rates: personal income (+42% yoy vs. +36% yoy in June), excise duties (+48% yoy vs. +42% yoy), and imports duties (up 3.4 times, the same as for the prior month).

Alexander Paraschiy: Inflation keeps feeding budget collections. Even net of central bank support, we observed a 51% yoy increase in budget revenue in July. The slump in VAT reimbursement was due to a statistical effect: in July 2014, UAH 5.75 bln in VAT bonds were issued in what created a high comparative base. At the same time, cash VAT reimbursement remained at a relatively high level (UAH 6.8 bln compared to UAH 5.3 bln in June).

This continued success with collections was among the key factors that pushed the Cabinet towards extra spending on wages and pensions. Given the substantial central bank support and steady two-digit monthly increases in consumption taxes, it looks like the budget is relatively balanced, even with extra social outlays. At the same time, we should keep in mind that budget surplus is solely due to local budgets while the central budget remains in red. Nonetheless, we do not expect the general budget to maintain a surplus and project a 4.2% GDP deficit by the end of 2015.

Источник: Конкорд Капитал