State budget virtually balanced in August

State budget balance turned marginally positive at USD 35 mln in August while the cumulative 8M12 deficit remained at a USD 2.1 bln (1.1% of 2012E GDP), according to Finance Ministry data. Increase in state budget revenues in August stood at a mere 3% yoy while proceeds from corporate profit tax (paid last month with relation to 2Q12 earning) remained flat yoy in August. In 8M12, the pace of revenue growth (+ 9.3% yoy) was well behind the pace of expenditure increase (+14.5% yoy).

Alexander Paraschiy: August stats support our view that government is unlikely to meet its 2012 state budget deficit target of USD 3.1 bln (1.7% of GDP). Disappointing economic growth rate (we estimate GDP fell in August on year-on-year basis) and hefty advance tax payments made in 1H12 will keep growth in budget revenues muted in the coming months. At the same time, expenditures growth is unlikely to subside, driven by social payments ahead of the October parliamentary election. We see 2012E state budget deficit in the range of 2.2-2.4% of GDP.