Ukraine estimates 2019 consumer inflation at 7.4% in budget draft

The 2019 Ukraine state budget draft assumes annual
consumer inflation of 7.4%, the UNIAN news agency reported, citing Ukrainian PM
Volodymyr Groysman’s statements at a Sept. 11 forum. “It is very important to
keep inflation below the two-digit indicator,” Groysman said.

The government also aims to cap the state budget
deficit at 2.2% of GDP in 2019 (vs. 2.4% of GDP for 2018).

Evgeniya Akhtyrko: It is
important for top officials to announce reasonable budget parameters while the IMF mission is in Kyiv.
While the issue of natural gas pricing for households is the primary focus of
current IMF-Ukraine talks, the mission will also monitor closely the 2019
budget process.

The government’s intention to reduce the budget
deficit-to-GDP ratio is positive, as any attempts to hike budget spending
during a year in which both presidential and parliamentary elections are
scheduled is a red flag for international lenders.

At the same time, the government projection for
2019 consumer inflation of 7.4% is much higher than the current target of 5.8%
by the National Bank of Ukraine (NBU). We can’t be sure why this large gap
exists but one of the implications is that the government will have
overestimated its 2019 budget revenues in case the NBU’s inflation target turns out to be more accurate.