Ukraine general budget collections slow to 30.7% yoy in May

Ukraine’s general budget revenue slowed to 30.7% yoy in May compared to 45.9% yoy in the prior month, according to a MinFin report released on June 26. Spending also slowed to 16.1% yoy compared to 22.4% yoy in April. The general budget balance in May remained in surplus, however significantly narrowed to UAH 0.9 bln compared to UAH 4.5 bln in April. At the same time, the central budget was reported at a UAH 2.6 bln deficit in May (UAH 5.6 bln surplus for 5M15).

All tax collections (except rent on mineral extraction) decelerated in May. In particular, VAT increased 11.3% yoy (vs. 21.1% yoy in April), excise duties grew 23.5% yoy (46.7% yoy in April), and import duties rose 199.4% yoy (220.5% yoy in April). At the same time, royalty on mineral extraction surged 2.4x yoy compared to +30.4% yoy in the prior month. Remarkably, central bank support (UAH 5.0 bln) underpinned state collections growth. Net of the central bank’s wire and other one-time collections, general budget revenue increased 25.0% yoy in May (vs. 31.9% yoy in the prior month).

Alexander Paraschiy: As expected, state collections are slowing. The devaluation effect is gradually evaporating and in 2H15, we expect budget revenue growth at no more than 20% on average. Also we see that the main reason for continued budget surplus is delayed spending of local authorities (near 2/3 of the 5M15 accumulated surplus of UAH 13.8 bln belongs to locals). At the same time, the state budget dropped into deficit already in May. These trends are totally in line with our expectations. Given that local authorities are unlikely to be saving funds (especially with local elections to be held on Oct. 25), we expect stronger spending from local budgets over the upcoming months. We are keeping our forecast for the general budget deficit at 4.1% of GDP for 2015.