More politics than economics

The government intends to discuss the 2013 draft budget in the near future, Prime Minister Mykola Azarov said earlier this week in Brovary. “The government is working out a schedule under which the draft state budget is to be submitted to the Verkhovna Rada on September 15 at the latest. For this reason, the draft will be examined at a Cabinet session within the next few days and then handed over to parliament,” he said. At the same time, Azarov did not point out the main macroeconomic targets on which the next year’s draft state budget is based.

In his turn, Petro Poroshenko, Minister for Economic Development and Trade, said at a ministry press briefing that he does not rule out that the government will have to revise some macroeconomic targets for the current year. In his words, the 2012 targets may be reconsidered in October-December on the basis of the last nine months’ results. “As a rule, targets are revised on the basis of the last five months’ results. We want first to see to what extent the permanent trends and crisis-related phenomena in the basic sectors have been reflected in the industrial outputs and prices and then make the necessary decisions,” the minister said. Poroshenko added that, to properly assess the macroeconomic targets situation, it is very important to understand the extent to which unfavorable weather conditions in July were compensated for by good weather in August. The minister announced that his ministry had already drawn up some proposals about the draft budget resolution. Yet Poroshenko refused to specify these proposals on the grounds that we should wait for the Cabinet of Ministers to approve them.”

COMMENTARIES

A 3-PERCENT GDP GROWTH,

A 6-7-PERCENT INFLATION RATE, A STABLE HRYVNIA

Yaroslav ZHALILO, president, Anti-Crisis Research Center:

“Knowing our government very well, we can presume that it will try to make an economically balanced budget (at least in the first reading). To what extent will it succeed in doing so before the elections? In my view, there will be more politics than economics in the first version. We forecast that the main economic targets for 2013 will be realistic. For example, the GDP is expected to rise by about 3 percent and the inflation rate will be a mere 6-7 percent. But if economic growth surpasses 3 percent, inflation will also rise to 8-9 percent. We expect a relatively stable exchange rate for the hryvnia. There may be some devaluation throughout 2013, but it will be of a purely technical nature and will be closely linked to inflation. Yet, owing to the inflow of investments, this trend may be reversed by means of a stronger hryvnia. I do not think that the hryvnia’s exchange rate will increase, but the national currency will be more stable thanks to increased investments. The hryvnia may get slightly devalued by the end of 2012 – from 7.99 to 8.05 hryvnias per dollar.”

“THE SHOWY AND OSTENTATIOUS NATURE OF SOCIAL ORIENTATION”

Vasyl YURCHYSHYN, economic programs manager, Razumkov Center:

“It will be, of course, a political document. The main targets of the 2013 budget will be kept intact, but it will be, on the whole, socially oriented. Also conspicuous will be clauses on financial injections for the regions. There will be rather optimistic macroeconomic targets in order to show that the economy will be developing dynamically, which will make it possible to broaden the range of social requirements without any detriment to the economy. As it is only the first draft budget, it will be popularized as much as possible, only to be revised later. Besides, the budget is traditionally revised in March. In my view, the budget will reflect the showy and ostentatious nature of the government’s socially-oriented policy.”