Ukraine's fiscal deficit could grow to 3.1% of GDP in 2017 – World Bank
The World Bank projects that Ukraine's fiscal deficit would expand to 3.1% of GDP in 2017 due to an increase in the minimum wage and the large deficit of the Pension Fund, Lead Economist and Program Leader covering Belarus, Moldova and Ukraine Faruk Khan has said at the presentation of the Ukraine Economic Update in Kyiv on Wednesday.
He said that the fiscal deficit in 2016 doubled, to 2.2% of GDP.
Public and guaranteed debt increased to 81% of GDP due to the recapitalization of PrivatBank in December 2016. Public and publicly guaranteed debt is projected to reach 89% of GDP in 2017. This growth of public and guaranteed debt would result to the fact that any borrowing becomes expensive for the state and create fiscal risks for the future outlook.
"In order to address macroeconomic vulnerabilities and gradually reduce public debt, the fiscal framework targets a reduction of the deficit to 2 percent of GDP by 2020," Khan said.
Achieving this target will require systematic fiscal consolidation anchored by reforms to the tax, pensions and social assistance systems, he said.
According to the World Bank, inflation in Ukraine is projected at 10% in 2017.
The World Bank said that fixed investment rebounded strongly by 20%from a low base. The figure is the highest since 2007.