Experts say one should not expect the 4.6% GDP growth stipulated in the draft national budget for 2021.
This opinion was voiced by head of the Committee of Economists of Ukraine, candidate of economic sciences Andriy Novak at a press conference.
“The budget is designed with a 4.6% increase, which will definitely not happen in 2021. There will be no such growth with the crisis-hit, problematic economy of Ukraine, even the developed nations will be unable to achieve this figure. We will end this year with a negative indicator, the only question is how big it will be. The second quarter showed a drop of 11%, and with such a collapse, one cannot expect that the next year the economy will suddenly start to grow, however, the draft budget for 2021 is built on this illusory hope,” Novak said.
The expert noted that there was a real risk of the failure to fulfill the revenues and expenditures of the next year’s budget and during 2021, the government would have to urgently raise public debt in order to cover the gap due to incorrect budgeting based on the unrealistic forecast for economic growth.
“We will again have a debt year and we will be dependent on whether the International Monetary Fund can give us a disbursement or not, whether the EU can give us a tranche. Wrong macro-forecasting boomerangs as an increase in the national debt, budget deficit and, as we can see, the hryvnia’s further weakening,” he said.
Serhiy Rodler, an analyst with the international financial company Teletrade, who was present at the press conference, noted that it was now difficult to say how such an economic growth could be ensured, because it was difficult to do this in the current realities.
He recalled that the draft budget provided for an increase in the minimum wage in 2021 to UAH 6,500 ($229), which would take place in two stages – up to UAH 6,000 ($211.5) from the beginning of 2021 and up to UAH 6,500 from July 1, 2021.
“The question how and with which funds the wages will be raised remains open for me. Because according to forecasts, GDP is expected to grow by 4.6% next year. This means that, according to expectations, businesses in the country would be able to produce more goods and services and would pay taxes from their sales. However, let’s look at things realistically. In 2021, the coronavirus will not disappear anywhere. That is, whether our government could be able to ensure the operation of businesses smoothly is the question,” Rodler said.
According to this plan, the government hopes to collect over UAH 1.07 trillion ($37.7 billion) in revenues, but the expenditure part is planned in the amount of UAH 1.35 trillion ($47.6 billion), he said. Accordingly, the budget revenues will only be enough for 80% of the expenses, while the remaining 20% (UAH 270 billion, orS$9.5 billion) will have to be borrowed.
“In the current situation, I think, the burden will again be put on entrepreneurs, because when the government plans to raise salaries for public sector employees, it is necessary to ensure that taxpayers earn more. And who are the taxpayers? Entrepreneurs. And under the current conditions, I mean possible quarantine restrictions, they are unlikely to earn more,” the analyst emphasized.
Future developments on the Ukrainian forex market were commented by Dmytro Chykh, a financial consultant at the Center for Exchange Technologies, who was present at the press conference.
He said that the hryvnia, the national currency, was unlikely to strengthen in future, especially against the background of the second wave of the COVID-19 pandemic. With the tightening of quarantine-related restrictions, according to the expert, the U.S. dollar is likely to renew its highs and reach the level of UAH 29.1 per U.S. dollar until the end of 2020.
“During October, we see the euro’s fluctuations within UAH 33-33.80 per euro. Under the optimistic scenario, the euro will consolidate below UAH 33 and then continue to go down to UAH 31.50. The pessimistic scenario suggests UAH 35-36 per euro. The second wave of the pandemic and international partners’ refusal to lend funds to Ukraine could facilitate the weakening of the hryvnia,” Chykh said.
During the press conference, the experts also expressed the opinion that the arrival of a new disbursement from the IMF until the end of this year was unlikely. According to Chykh, the deficit of the national budget set at 6% runs counter to the Fund’s expectations.
Novak, in turn, said that today the IMF’s requirements and the related second part of the EU tranche were a general political issue in terms of the fight against corruption, and all attention was focused on the created anti-corruption agencies, which were not effective. (UNIAN/Business World Magazine)