Ukraine budget deficit hits 4.4% of GDP in 2013

Макроэкономика 29.01.2014 Ukraine’s 2013 state budget deficit reached UAH 64.7 bln, or 4.4% of GDP, making for a 21.1% yoy increase, the Finance Ministry reported on Jan. 28. In 2012, the state deficit was UAH 53.5 bln or 3.8% of GDP. Alexander Paraschiy: The real, cash-based budget deficit exceeded our expectations (we projected 4.0% of GDP). A worsened state revenue shortfall (UAH 30.9 bln below the year-end target) was the main reason behind the outcome. As a result, the Cabinet had to cover the gap with new loans (including the Russian-bought bonds), thus increasing the public debt to 40% of GDP by the end of 2013. Still, the effective fiscal gap (accrual based) as usual was much wider and reached 6.1% of GDP if to include payables, agri-funding support and effective funding to Naftogaz. For 2014, we see the fiscal gap exacerbating to the exceedingly high level of 7.0% of GDP. We see the Russian loan (USD 12 bln) as the only real source available to fill the increasing fiscal gap for current year under the current political leadership.