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5.3 FDI
Through October, Ukraine has attracted $221mn in new direct foreign investment — 5% of the $4.5bn attracted during the first 10 months of 2019, the National Bank of Ukraine reported yesterday. Similarly, reinvestment by foreigners also fell sharply during the same period: to $639mn, from $2.9bn this time last yea. Foreign loans also plummeted to $219mn, from $640mn last year, the central bank reports. Analysts put the blame on the coronavirus recession and on the stalling of Ukraine’s movement to clean up the judiciary and implement free market changes.
6.0 Public Sector 6.1 Budget
President Zelenskiy signed on December 22 the national budget for 2021. Expenditures are to be $46.5bn and revenues are $38.2bn. The deficit of $8.3bn is to be 5.5% of GDP, forecast at $150bn. For the Big Construction roads program, $5.3bn is to be spent.
The budget is built around these numbers for 2021: GDP growth -- 4.6%; inflation -- 7.3%, public debt to GDP at 65%; average exchange rate -- UAH29.1 per dollar (versus UAH28.39 today).
Starting December 22, the minimum monthly wage increases to UAH6,000, or $211. The budget predicts an average monthly salary of $480.
Rada approves 2021 state budget with a 5.5% of GDP deficit. Ukraine’s parliament voted on December 15 to adopt the 2021 state budget with 289 votes in favor (226 votes needed). The bill was approved by part of the pro-presidential People’s Servant faction (225 out of 246 MPs), most deputies from Dovira and For the Future parliamentary groups as well as half of Yulia Tymoshenko’s Fatherland faction and some non-faction MPs. Meanwhile, the pro-Western European Solidarity and Voice factions, as well as the pro-Putin faction Opposition Platform For Life, provided no votes for the budget bill.
Budget spending plans in infrastructure: roads – $3.2bn; Ukrzaliznytsia railroad: $160mn; airports -- $85mn.
The 2021 budget assumes an increase of planned budget revenue of UAH1,092bn (vs. UAH1,071bn in the first draft) and expenditures of UAH1,347bn (vs. UAH1,331bn in the first draft). The planned budget deficit is UAH247bn (vs. UAH260bn in the first reading), or 5.5% of expected GDP.
The major changes from the first budget reading were mostly related to the distribution of expenditures on road reconstruction and development.
Evgeniya Akhtyrko: The adopted budget is a compromise document adjusted from the first reading to comply with the IMF's vision of a “realistic” financial plan for the country, which greatly needs the financial support of international financial institutions.
However, we believe it is a counterproductive practice to adopt the budget with a deficit above a generally accepted “safe” level of 3% of GDP when no
32 UKRAINE Country Report January 2021 www.intellinews.com
