Ukraine will unlikely see economic growth next year / REUTERS
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 at UNIAN.
"The budget is designed with an increase by 4.6%, 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. We will end this year with a negative indicator, the only question is how bit 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, the draft budget for 2021 is built on this illusory hope," Novak said.
Risk of failing to fulfill next year's budget
The expert noted that there is a real risk of the failure to fulfill the revenues and expenditures of the next year's budget, and during 2021 the government will have to urgently raise public debt in order to cover the gap from 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 IMF [International Monetary Fund] will give us a disbursement or not, whether the EU will 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.
What will let Ukraine's economy grow
Serhiy Rodler, an analyst with the international financial company Teletrade, who was present at the press conference, noted that it is now difficult to say how such an economic growth could be ensured, because it is difficult to do this in the current realities.
He recalled that the draft budget provides for an increase in the minimum wage in 2021 to UAH 6,500, which will take place in two stages – up to UAH 6,000 from the beginning of 2021 and up to UAH 6,500 from July 1.
"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 will be able to produce more goods and services and will pay taxes from their sales. However, let's look at things realistically. In 2021, the coronavirus will not disappear anywhere ... That is, will our government be able to ensure the operation of businesses smoothly, that is the question," Rodler said.
Budget deficit in 2021
According to this plan, the government hopes to collect over UAH 1.07 trillion in revenues, but the expenditure part is planned in the amount of UAH 1.35 trillion, he said. Accordingly, the budget revenues will only be enough for 80% of the expenses, the remaining 20%(UAH 270 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.