Cabinet sends budget to parliament, few details made public

The Cabinet of Ministers approved on Dec. 3 its 2013 spending plan and forwarded it to parliament for review.  None of the budget’s parameters were disclosed except for key 2013 macro figures: GDP is projected at 3.4%yoy, CPI is seen to exceed 6%, and the hryvnia is expected to weaken to 8.5/USD next year, on average. Today, the parliament will consider the 2013 spending plan in its first reading, with more details to emerge.

Alexander Paraschiy: The Cabinet has updated its 2013 vision based on macro realities that were ignored in the September version.  At least the government lowered its GDP expectations (which was 4.5% GDP growth in September) and established an exchange rate target.  Yet we still need to know the fate of critical pre-election social initiatives and how the Cabinet intends to deal with a revenue shortfall if utility tariffs remain unchanged and social payments aren’t cut.  The budget deficit must be in the range of 2-3% of GDP, which is crucial for IMF cooperation and minimizing sovereign risk. We expect  the budget will reveal the 2012 shortfall exceeded 5% of GDP, thereby dooming authorities to cut social spending in its 2013 plan to narrow the deficit.