NBU raises Ukraine budget deficit forecast for 2024-2026

MOSCOW. Aug 5 (Interfax) - The National Bank of Ukraine (NBU) has raised its forecast for the country's consolidated budget deficit this year to 22.8% of GDP from 20.7%, not including grants.

The deficit forecasts for 2025 and 2026 have been raised to 17.8% of GDP from 13.5% and to 10.3% from 7.5%, respectively, Ukrainian media reported, citing an NBU inflation report published on Friday.

The deficit forecast was raised due to substantial defense spending, as well as subsequent spending on recovery and humanitarian projects, the NBU said.

The expansion of the domestic resource base will help narrow the budget deficit, although fiscal policy will remain loose, the NBU said. This will stimulate investment activity, including infrastructure restoration projects and expansion of weapons manufacturing capacity, it said.

The forecast for the 2024 state budget deficit taking into account grants, meanwhile, has been lowered to 16.3% of GDP from 18.4%, with the nominal figure lowered to UAH1.24 trillion from UAH1.4 trillion. However, grant funding is expected to fall dramatically in subsequent years, so even with grants the deficit forecasts for 2025 and 2026 have been raised to 13.6% of GDP from 10.8% and to 8.9% of GDP from 7.3%, respectively.

The official exchange rate was UAH41.14/$1 on August 2.