Ukraine general budget revenue growth slows to 16% yoy in February
29 March 2016
Ukraine’s general budget revenue growth slowed to 16.2% yoy in February compared to +32.7% yoy in the prior month, the state Treasury reported on March 28. In 2M16, revenue growth reached 22.6% yoy. General budget revenue reached UAH 53.5 bln in February compared to UAH 46.0 bln in the same year-ago month. Spending increased 19% yoy in February compared to a 7% yoy decline in January.
The general budget balance improved to a UAH 9.9 bln surplus for 2M16 (UAH 9.0 bln in January). The main reason for the positive balance was local budgets that produced a UAH 12.3 bln surplus in 2M16 (up from UAH 6.6 bln in January). At the same time, the central budget reached a UAH 2.4 bln deficit for 2M16, meaning that February’s central budget deficit was UAH 4.9 bln.
February’s state collections slowed owing to no central bank support (vs. UAH 5.5 bln a year ago). At the same time, a 3.3x (UAH 4.5 bln) upsurge in royalty on mineral extraction generated 60% of the budget revenue increase in February. Robust growth occurred in collections from excise duties (+41% yoy, or UAH 1.9 bln) and personal income tax (+41% yoy, or UAH 2.9 bln). At the same time, VAT collections substantially slowed to +20% yoy (UAH 2.7 bln) compared to 46% yoy (UAH 4.4 bln) in the prior month. Remarkably, enterprise profit tax collections plunged 40% (UAH 1.3 bln) during the month.
Alexander Paraschiy: The effect of the low comparative base eased in February is what inevitably slowed state collections. Recall, Ukraine’s CPI accelerated to +60.9% yoy in April 2015 from +28.5% yoy in January, eventually leading to inflation being the key source of budget revenue growth in 2015.
Against this backdrop, we should expect slowing growth rates of state revenue over upcoming months in line with sliding inflation rates. Nevertheless, we do not expect state revenue growth to fall below +8.0% yoy targeted for the 2016 general budget. Thus far, we do not see any risk of the central budget deficit exceeding 3.7% of GDP as required by the IMF program. Nevertheless, after large-scale tax rules are amended, we should not be surprised if some adverse effect pops up at some stage.
