National Bank of Ukraine expects budget deficit excluding grants to shrink to 12% of GDP by 2024
MOSCOW. Oct 28 (Interfax) - The National Bank of Ukraine (NBU) anticipates that the budget deficit will be gradually shrinking, without grants taken into account, from 25% of GDP in 2022 (16% of GDP with grants considered) to 19% of GDP in 2023 and 12% of GDP in 2024, Ukrainian media have reported with an inflation report the NBU published on its website early on Friday.
"International financial assistance has been the primary source of covering significant budget needs during the crisis. In the third quarter, grant funding ($7.8 billion) was of special significance as an income source, exceeding 40% of state budget revenues (over a quarter since the start of the year)," the NBU said.
"Another reason for the deficit to narrow is the partial lifting of tax breaks and preferences," it said.
In this context, the NBU adjusted its 2022 budget deficit forecast to 764 billion hryvni from 811 billion hryvni indicated in its July forecast.
At the same time, the NBU worsened its budget deficit forecast for 2023 to 804 billion hryvni from 632 billion hryvni and that for 2024 to 591 billion hryvni from 499 billion hryvni compared to its July forecast.
The bank expects substantial foreign financial support to continue and is not panning monetary financing in 2023.
The NBU said considerable budget expenditures ensure Ukraine's defense capability and the people's support, and a number of tax stimuli will remain in place to support the business sector.
The substantial budget deficit produces a fiscal incentive easing the crisis implications for the economy in 2022 and laying the groundwork for a future recovery, it said.
The consolidated budget deficit in January-September 2022 reached an all-time high of over 407 billion hryvni considering grants and nearly 750 billion hryvni excluding grants, it said.
At the same time, the NBU warned that the budget deficit should be narrowed significantly after 2024 to stabilize the sovereign debt.