The Ukrainian Parliament adopted December 21th 2016 the National Budget for 2017. The German Advisory Group has made a summery and assessment of the budget, which can be found here. The text below is based on this report.With expected public deficit of 3 per cent of Gross Domestic Product (GDP), the fiscal consolidation process is on track and in line with the International Monetary Fund’s requirements. In comparison, the public deficit (including Naftogaz) was 11.3 percent in 2014. Few countries have according to the German Advisory Group made similar progress over such a short period of time.
The Ukrainian Goverment assume in the budget the economy to grow with 3% in 2017. This is according to the German Advisory Group a realistic assumption if the reform process continues. Inflation is forecast at 8.1% and the exchange rate at an average of 27.2 UAH/USD.
Public revenue is expected to grow by 20% over last year. Constituting 40 per cent of the revenue, value added tax (VAT) is the most important tax, followed by personal income tax and excise duty. The increase in income enables the goverment to further invest in the reform process.
The official monthly minimum wage will increase from UAH 1,600 to UAH 3,200 (equivalent to 120 USD). While the raise in minimum wage will increase the public sector wage bill, the goverment also expects increaded revenues, as a result of reduced undecleared indome and higher consumption.
The nationalisation of Privatbank increased the public debt in 2016, to estimated 85 per cent of GDP. The public debt is expected to stay flat in 2017.
- January 23, 2017