Budget deficit reaches 3.8% of GDP in 2012

The state budget deficit increased by 2.3 times and reached UAH 53.39 bln in 2012, or 3.8% of GDP, according to a MinFin report released on Feb. 7. The fiscal gap was UAH 49.64 bln while UAH 3.75 bln accounted for new state loans.

Alexander Paraschiy: A state revenue shortfall (UAH 28.0 bln, or 7.5% below plan) was the main reason for the sharp deficit increase. We even expected the fiscal gap to be 4.8% of GDP, or UAH 67.6 bln in 2012, assuming the spending target was implemented in full. However, due to year-end under-spending, the deficit for the year came to only 3.8% of GDP. The fiscal gap was covered from privatization proceeds (UAH 6.75 bln), new loans (UAH 28.6 bln raised domestically and USD 1.36 bln externally) and cash residuals accumulated at Treasury accounts. In 2013, the Cabinet is targeting a budget deficit of 3.1% of GDP (excluding the Naftogaz deficit), but spending appetites are likely to grow throughout the year.