28 December 2011
Ukraine’s state budget deficit narrowed to UAH 11.1 bln in 11M11 (0.9% of 2011E GDP), implying a November surplus of UAH 1.3 bln, according to the Finance Ministry. Additionally, the costs of capitalizing banks and Naftogaz was UAH 21.4 bln (USD 2.7 bln), or 1.7% of GDP. Budget revenues growth remained strong at 23% yoy in 11M11 (net of last year’s VAT-bond effect), with tax proceeds growing even faster at 44% yoy. Cash expenditures from the state budget increased 9% yoy. Vitaliy Vavryshchuk: The positive budget balance in November is a surprise and implies the government is keeping its expenditures in check against the backdrop of tough debt markets and limited liquidity. We see the 2011E state budget deficit at close to 2.0% of GDP (excluding capitalization costs), or below the initial target of 2.5% of GDP.