Ukraine budget revenue drops 8% yoy in June

Ukraine’s state budget revenue slumped 8.1% yoy in June resulting in a 0.3% yoy decline for 1H13, the state Treasury reported on July 3.

Alexander Paraschiy: It looks like fiscal crisis is approaching full steam. After relatively good budget revenue growth in the first quarter on advanced payments, we’re now seeing dwindling revenues already three months in a row. Private consumption is sliding and industrial output is in the red. Against this backdrop, budget sequestration looks inevitable.

State authorities are floating the idea of alternative approaches like the extensive use of quasi-money (promissory notes) for budget payments. But if the initiative is enacted, arrears will only grow and budget revenue will fall even faster. In this context, we’ve become more pessimistic on the budget shortfall, estimating state revenue will be flat yoy (vs. budgeted +4.9% yoy). Still, we are not inclined to revise our budget deficit forecast (3.5% of GDP), anticipating that MinFin will just accumulate more arrears through the year.