Preliminary analysis of the budget for 2019

Today, the government has presented the budget. A brief preliminary analysis:

Budgets of the law enforcement bodies (Ministry of Internal Affairs, GPU, SBU) have grown significantly, whereas the army budget has grown less than the budgets of the law enforcers;

Subsidies were cut against a probable increase in the price of gas;

Subventions of local budgets are reduced;

Public debt management has increased.

In the presentation, which was published previously, everything was very joyful and optimistic. Logic suggests that this presentation was to present all the best that the draft budget has, everything the government is proud of.

This makes it even more interesting to look at the numbers.

For example, the planned indicators of real GDP growth: 2018 – 3.0%, 2019 – 3.0%. Is this a lot or not much? This is not much. Because the world GDP in 2018 will grow by 3.9%, and in 2019 – by 3.9%. Developing countries (and Ukraine is one of them) will grow by 4.9% on average in 2018, and by 5.1% in 2019. Not only Ukraine is lagging behind the rest of the world, but also every day of this government is increasing the gap, and this will continue next year if nothing changes. The fact that our economy is not falling is already presented as an achievement by our government, but there is a different rule existing in the world, which was once formulated by  Lewis Carol in “Alice in Wonderland”, “We need to run at full speed to just stay in place, and to get somewhere, we must run at least twice as fast!”. You might ask when we will catch up with Poland? The answer is – with this government, never, because Poland’s GDP this year will grow by 4.1%.

Another indicator is planned inflation. First of all, control of inflation is a function of the National Bank, which is completely independent of the government. Secondly, it is certainly very interesting to hear about the plans. Namely, in 2018 the indicator is 9.9%, in 2019 – 7.4. But in fact, we have inflation for January-August 2018 at the level of 11.7%. We hope that in the second half of the year the situation will radically improve and Ukraine will reach a 9.9% annual rate. And thirdly, the average inflation in developing countries in 2018 is 4.6%.

Also, the presentation lacks a couple of slides. For example, there is nothing about the introduction of the tax on withdrawn capital, about the privatization of state enterprises, about the planned budget revenues from special confiscation of assets of the previous authorities that were illegally seized, about the unbelievable results of fighting smuggling at customs and, consequently, a rapid growth of customs payments to the budget.

Tetyana Ostrikova
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