Ukraine budget deficit reaches UAH 66 bln in 2018

Ukraine’s general budget switched to a deficit of UAH
88.3 bln in December from a UAH 7.1 bln surplus in November, the State Treasury
reported on Jan. 28. General budget revenue increased 18.6% yoy to UAH 109 bln,
slowing from 21.6% yoy growth in November. Budget expenditures rose 19.6% yoy
to UAH 198 bln, speeding up from 16.7% yoy growth in November.

Tax revenue increased 13.3% yoy, slowing from 21.8%
yoy growth in November. In particular, enterprise profit tax revenue dropped
30.8% yoy after 32.4% yoy growth in November. Personal income tax revenue slowed
to 19.7% yoy growth from a 26.2% yoy improvement in November. Meanwhile, net
VAT revenue jumped 48.3% yoy (vs. a 16.6% yoy decline in November) due to an
11.4% yoy decline in VAT reimbursement.

Non-tax revenue surged 42.1% yoy, speeding up from 21.6%
yoy growth in November. In particular, income from ownership and
entrepreneurship swelled 74.6% yoy (vs. 33.8% yoy growth in November).

In 2018, the general budget posted a deficit of UAH
65.9 bln amid revenue growth of 16.5% yoy and an expenditure increase of 18.3%
yoy. General budget revenue met 98.6% of the 2018 plan in 2018, while
expenditures were at 93.7%.

In related news, the
State Treasury on Jan. 30 reported that the state budget deficit amounted to
UAH 59.2 bln in 2018, while the law on the state budget assumed a deficit of UAH
94.1 bln.

Evgeniya Akhtyrko:  We
expected the budget deficit to swell in the last month of the year
given the cautious budget spending through the most of the year. The drop in
VAT reimbursement is a bit worrisome. The extension of this trend is likely to
mean that the government returned to its poor habit of delaying VAT
reimbursement to exporters.

The 2018 state budget deficit amounts to 1.7% of
GDP, according to our estimates, which comfortably meets the IMF-required
threshold of 2.5% of GDP.