Ukraine budget revenue drops 9% yoy in May

Ukraine’s state budget revenue slumped 9.4% yoy in May but still preserved a modest 1.5% yoy growth for 5M13, the state Treasury reported on June 5.

Alexander Paraschiy: The situation in Ukraine’s fiscal sector is getting aggravated in line with the sliding real sector. At the year’s start, advanced enterprise profit tax payments underpinned budget revenue, but now we see this effect wearing off. No doubt, the NBU will support MinFin with direct transfers and state bond purchases over the next few months. However, in view of the probable QE tapering and anticipated resumption of devaluation pressure to start in the late summer, active hryvnia emissions shouldn’t extend beyond September, in our view. Against this backdrop, we expect a budget deficit at least 3.5% of GDP (vs. a planned 3.1%) and likely growing budget arrears, or some active use of quasi-money like promissory notes to cover unpaid debt.