{"id":15464,"date":"2020-09-27T12:38:30","date_gmt":"2020-09-27T09:38:30","guid":{"rendered":"https:\/\/ces.org.ua\/?p=15464"},"modified":"2020-11-05T12:43:45","modified_gmt":"2020-11-05T09:43:45","slug":"review-of-the-draft-budget-2021-the-%ef%ac%81rst-reading","status":"publish","type":"post","link":"https:\/\/ces.org.ua\/en\/review-of-the-draft-budget-2021-the-%ef%ac%81rst-reading\/","title":{"rendered":"Review of the draft budget 2021. The \ufb01rst reading"},"content":{"rendered":"<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/YVI_R9M_tiQ\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p style=\"text-align: justify;\"><a href=\"\/?p=15243\">Read the transcript of the press conference<\/a> by Maria Repko and Anastasiia Teleton and the discussion on the expenditures on human capital with Pavlo Kovtoniuk, the Deputy Minister of Health (2016-2019), Egor Stadnyy, the Deputy Minister of Education and Science (2019-2020), and Olesya Ostrovska-Luta, the General Director of National Cultural, Art, and Museum Complex \u201cArt Arsenal.\u201d The 2021 budget has three main features: the increase in the minimum wage by 30% to UAH 6 500, a huge state budget de\ufb01cit at 6% of GDP, an unrestricted opportunity for the government to provide guarantees on debt.<\/p>\n<p style=\"text-align: justify;\">Budget revenues are projected based on a 19% increase in revenues from personal income tax and a 21% increase in VAT (domestic and import). Simultaneously, the economy will grow only by 13% in nominal terms according to governmental forecasts for 2020 and 2021. The Ministry of Finance expects the economy to start to move out of the shadows, but this approach is not conservative because there is always a risk that this move will not happen; therefore, no additional income will be received.\u00a0 In addition to an optimistic in\ufb02ation forecast (7.3% against current 2.5%); however, those calculations are based on two factors that may not come true. If no or moderate de\ufb01cit was expected, a slight increase in borrowings could \ufb01x the situation. Compared to previous years (except for the \u201cquarantine\u2019s\u201d 2020), the largest de\ufb01cit is already expected, and the Ministry of Finance has no room to maneuver anymore.<\/p>\n<p style=\"text-align: justify;\">A total of 45% of GDP will be allocated for general government expenditures. It is 5 percentage points less than is planned for 2020 but exceeds the average of 2017-2018 of 42% GDP. The nominal growth of spending will be affected by set forecasts of macro indicators and two political \u201cwhims\u201d: an increase in minimum wage and \ufb01nancing of road constructions. Healthcare and education will receive the most additional funding (+17.1% and +12.2% accordingly). Economic activities will lose 14.4% of its funding. The government plans to get extra UAH 70 billion road construction spending through borrowing under state guarantees. This could be considered substitution of budget expenditures with quasi-\ufb01scal expenditures.<\/p>\n<p style=\"text-align: justify;\">The budget de\ufb01cit will be \ufb01nanced through domestic borrowings. Given that a large de\ufb01cit is planned for 2020 and that as of the end of September it is still below the planned level, so planned net borrowings without timely receipt of the tranches from the IMF will be an unaffordable amount for the domestic market over the next 15 months.\u00a0 We would like to see the following global changes in public \ufb01nances:<\/p>\n<ul style=\"text-align: justify;\">\n<li>A more conservative approach in planning budget revenues, as receiving less revenue than planned, will mean budget sequestration. The macro forecast must be depoliticized and revenues must be planned conservatively, otherwise, the country may get an unpleasant surprise. For such a vulnerable and fragile economy as the Ukrainian one, \ufb01scal stability is crucial.<\/li>\n<li>Arrangement and approval of a three-year budget declaration<\/li>\n<li>Compliance with norms of budget code for the maximum size of the deficit, debt, and state guarantees<\/li>\n<\/ul>\n<p style=\"text-align: justify;\">In the 2021 budget, we think it is appropriate:<\/p>\n<ul>\n<li style=\"text-align: justify;\">Slowing down the wage raise (let\u2019s say, increasing the minimum wage to UAH 6 000 in 2021 and UAH 6 500 in 2022, and further develop a transparent depoliticized mechanism to determine the level of social guarantees)<\/li>\n<li style=\"text-align: justify;\">Revising the macro forecast accordingly, without taking into account the increase in minimum wage and forecast indicators for budget revenues<\/li>\n<li style=\"text-align: justify;\">Allocating expenditures in such a way that de\ufb01cit will constitute no more than 3% of GDP, based on a conservative revenue forecast<\/li>\n<li style=\"text-align: justify;\">Restoring the norms of Budget Code that limit the size of state guarantees and not creating a new quasi-\ufb01scal \u201cblack hole\u201d from Ukravtotodor, as it was previously a case of Naftogaz, Pension Fund, and state-owned banks.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Read the transcript of the press conference by Maria Repko and Anastasiia Teleton and the discussion on the expenditures on human capital with Pavlo Kovtoniuk, the Deputy Minister of Health (2016-2019), Egor Stadnyy, the Deputy Minister of Education and Science (2019-2020), and Olesya Ostrovska-Luta, the General Director of National Cultural, Art, and Museum Complex \u201cArt [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":15157,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[176,197,143],"tags":[546],"experts":[172,378],"news_type":[140],"class_list":["post-15464","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-macroeconomics-en","category-research-list-en","category-home-news-en","tag-budget-en","experts-maria-repko","experts-anastasiia-teleton-en","news_type-researches"],"acf":[],"_links":{"self":[{"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/posts\/15464","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/comments?post=15464"}],"version-history":[{"count":0,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/posts\/15464\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/media\/15157"}],"wp:attachment":[{"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/media?parent=15464"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/categories?post=15464"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/tags?post=15464"},{"taxonomy":"experts","embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/experts?post=15464"},{"taxonomy":"news_type","embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/news_type?post=15464"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}