Ukraine general budget surplus reaches 1.0% of GDP in 11M15

Ukraine’s general budget revenue growth accelerated to 65.8% yoy in November compared to 45.9% yoy in the prior month, the State Treasury reported on Dec. 25. Spending also grew much faster at 55.1% yoy vs. 18.9% yoy in October. The general budget deficit was UAH 6.8 bln in November.

For 11M15, the general budget still remains at a surplus of UAH 20.0 bln (near 1.0% of GDP). In 11M15, general budget revenue increased 43.2% yoy while spending grew only 22.5% yoy. Local budgets with a UAH 24.3 bln surplus remain the key reason for the positive general budget balance. At the same time, the central budget already had a UAH 4.3 bln deficit by the end of November.

National Bank of Ukraine profits (UAH +7.0 bln), a 3.8x surge in import duties (UAH +3.1 bln), a 2.4x increase in mineral extraction taxes (UAH +3.4 bln), a 52.4% yoy increase in excise duties (UAH +2.1 bln) as well as 34.1% yoy growth in personal income tax collections (UAH +2.3 bln) remained the key source of the extraordinary budget revenue growth. These five items were responsible for more than 70% of the general budget revenue in November.  

Alexander Paraschiy: The November results confirm (1) the year-end general budget collections will be higher than initially targeted by nearly UAH 10-15 bln, (2) the year-end general budget spending will be much less than scheduled, which means that the deficit will be below the 4.2% of GDP level initially outlined, and (3) the 2015 budget is on the safe side. At the same time, the prospects for 2016 are quite uncertain. In general, we are positive about the approved 2016 budget with a 3.7% of GDP deficit and significantly narrowed quasi-fiscal spending. The adopted spending plan means that the next IMF tranche will almost certainly arrive in January-February 2016. At the same time, the hasty last-minute tax changes might contain many risks that we will learn only when they take effect, let alone more changes that might be introduced when the dust of tax reform disputes finally settles. All in all, we anticipate quite a challenging budget implementation process in 2016.