Ukraine budget deficit reaches 2.8% of GDP for 10M13

Ukraine’s state budget deficit for 10M13 reached UAH 40.8 bln, adding USD 5.6 bln from September, according to a Finance Ministry report released on November 29. The 10M13 figure is equivalent to 2.8% of Ukraine’s estimated full-year 2013 GDP.

Alexander Paraschiy: Despite the reported budget revenue increase in October (+2.7% yoy), the government incurred one of the highest monthly deficits over the last year (UAH 5.6 bln), having faced the need to fund basic public spending like wages and social outlays. November and December will be the hardest months for the budget.

To meet the 2013 state spending plan in full, the government will have to spend USD 50 bln in both November and December, which is 1.6x more than the average monthly spending for 10M13, or UAH 32 bln. The higher spending will occur against the backdrop of limited possibilities for the National Bank of Ukraine to support the budget with hryvnia printing, given the tension on the ForEx market.

We are keeping our view on the 2013 budget deficit prospects at 4.0% of GDP, anticipating the main part of outlays to be incurred on the last days of the year to avoid additional pressure on the ForEx market.