Abstract
This 2004 Article IV Consultation highlights that six years after the 1998 financial crisis, Ukraine continues to recover strongly. In 2003, real GDP grew by 9.4 percent, despite a poor harvest, and reached 13.5 percent through July 2004. Growth in 2003–04 has been prompted by favorable external demand, a competitive cost structure, and dynamic domestic demand. Inflation has been moderate, but strong upward pressures are emerging. There has been progress in the structural reform agenda, but tax administration should improve.
1. This supplement provides information on developments since the staff report was issued. The new information strengthens the concerns expressed in the staff appraisal (see below), particularly with regard to the procyclical loosening of fiscal policy.
2. Inflation continues to edge up. Despite the government’s attempt to contain increases in gasoline and food prices, modest central bank sterilization operations, and an excellent harvest, annual CPI inflation rose to 10.7 percent in September, thus hitting double digits for the first time since June 2001. In response, the National Bank of Ukraine raised its discount and overnight refinance rates by 50 basis points in October. Since May seasonally-adjusted monthly inflation has remained, at 1 percent, more than double the average over the first four months of the year. Annual PPI inflation also continued to increase and reached 23.2 percent. Moreover, recently released data on household income and consumption show a sharp acceleration of expenditure in August. This and the recent loosening of fiscal policy are clear harbingers of further inflationary pressures. As a result, the staff projects that CPI inflation could reach 11 percent by year end. The authorities maintain that inflation will revert to single digits.
3. In the run-up to the presidential election, spending pressures are rising. The government approved an increase in the minimum monthly pension from HRV 130 ($25) to HRV 284.6 ($54), effective retroactively September 1, 2004. This increase—which follows two earlier sizeable increases in the year—boosts the monthly pension bill by 36 percent for the remaining four months of the year, raising government expenditure by about 1¼ and 3 percent of GDP in 2004 and 2005, respectively. The government has also decided to clear wage arrears at state and bankrupt agricultural enterprises, and to increase social spending. Looking ahead, both leading presidential candidates have announced new plans for more aggressive tax rate reductions than envisaged so far, and additional compensation for lost savings from the hyperinflation of the early 1990s, adding yet more uncertainty about the stance of future fiscal policy.
4. With much of the increase in government spending now clearly recurrent and in the absence of offsetting measures, the fiscal outlook for 2004 and 2005 has deteriorated substantially. More specifically:
Ukraine: Consolidated Budget Deficit, 2004-05
Staff report projections assume a reduction in the VAT rate from 20 percent to 17 percent in 2005 (accounting for 0.8 percent of GDP), based on the July discussions.
The budget assumes that the VAT rate is not cut in 2005 (since planned legislation has not yet been approved); and does not incorporate the recent pension increase. Note also that the actual budget numbers for revenues and expenditures are 2 percent of GDP higher than reported in the table, reflecting offset transactions.
Staff assessment of the fiscal stance in 2005 is based on the draft budget and the recently approved measures.
Corrective measures needed to achieve the target envisaged in the draft 2005 budget submitted to parliament in September.
Ukraine: Consolidated Budget Deficit, 2004-05
| 2004 | 2005 | |||||||
|---|---|---|---|---|---|---|---|---|
| Prog. | Staff report (proj.) | Oct. (proj.) | Staff report (proj.) 1/ | Budget 2/ | Oct. (proj.) 3/ | |||
| (In percent of GDP) | ||||||||
| 1. | Revenues | 37.3 | 35.5 | 35.6 | 33.7 | 35.7 | 35.0 | |
| 2. | Expenditures | 39.0 | 38.9 | 40.2 | 35.3 | 37.5 | 41.2 | |
| o.w. pensions | 9.9 | 9.7 | 10.9 | 9.7 | 9.3 | 12.2 | ||
| 3. | Corrective measures to be identified 4/ | … | … | … | … | … | 4.4 | |
| 4. | Overall balance (1+2+3) | -1.8 | -3.4 | -4.6 | -1.6 | -1.8 | -1.8 | |
| Financing | 1.8 | 3.4 | 4.6 | 1.6 | 1.8 | 1.8 | ||
| External | 0.4 | 1.7 | 1.7 | 0.4 | 0.1 | 0.5 | ||
| Domestic | 0.5 | -0.9 | -0.2 | 0.0 | 0.6 | 0.1 | ||
| Privatization | 0.8 | 2.6 | 3.1 | 1.2 | 1.1 | 1.1 | ||
| Memorandum items | (Annual change in percent, unless otherwise indicated) | |||||||
| Revenues | 11.4 | 19.5 | 21.0 | 9.5 | 17.0 | 12.2 | ||
| Expenditures | 14.5 | 28.5 | 34.0 | 4.7 | 8.9 | 19.4 | ||
| Pensions | 31.9 | 44.3 | 64.3 | 13.8 | -0.4 | 31.0 | ||
| GDP (in billions of hryvnias) | 292.0 | 328.5 | 332.0 | 379.5 | 387.3 | 387.1 | ||
Staff report projections assume a reduction in the VAT rate from 20 percent to 17 percent in 2005 (accounting for 0.8 percent of GDP), based on the July discussions.
The budget assumes that the VAT rate is not cut in 2005 (since planned legislation has not yet been approved); and does not incorporate the recent pension increase. Note also that the actual budget numbers for revenues and expenditures are 2 percent of GDP higher than reported in the table, reflecting offset transactions.
Staff assessment of the fiscal stance in 2005 is based on the draft budget and the recently approved measures.
Corrective measures needed to achieve the target envisaged in the draft 2005 budget submitted to parliament in September.
Ukraine: Consolidated Budget Deficit, 2004-05
| 2004 | 2005 | |||||||
|---|---|---|---|---|---|---|---|---|
| Prog. | Staff report (proj.) | Oct. (proj.) | Staff report (proj.) 1/ | Budget 2/ | Oct. (proj.) 3/ | |||
| (In percent of GDP) | ||||||||
| 1. | Revenues | 37.3 | 35.5 | 35.6 | 33.7 | 35.7 | 35.0 | |
| 2. | Expenditures | 39.0 | 38.9 | 40.2 | 35.3 | 37.5 | 41.2 | |
| o.w. pensions | 9.9 | 9.7 | 10.9 | 9.7 | 9.3 | 12.2 | ||
| 3. | Corrective measures to be identified 4/ | … | … | … | … | … | 4.4 | |
| 4. | Overall balance (1+2+3) | -1.8 | -3.4 | -4.6 | -1.6 | -1.8 | -1.8 | |
| Financing | 1.8 | 3.4 | 4.6 | 1.6 | 1.8 | 1.8 | ||
| External | 0.4 | 1.7 | 1.7 | 0.4 | 0.1 | 0.5 | ||
| Domestic | 0.5 | -0.9 | -0.2 | 0.0 | 0.6 | 0.1 | ||
| Privatization | 0.8 | 2.6 | 3.1 | 1.2 | 1.1 | 1.1 | ||
| Memorandum items | (Annual change in percent, unless otherwise indicated) | |||||||
| Revenues | 11.4 | 19.5 | 21.0 | 9.5 | 17.0 | 12.2 | ||
| Expenditures | 14.5 | 28.5 | 34.0 | 4.7 | 8.9 | 19.4 | ||
| Pensions | 31.9 | 44.3 | 64.3 | 13.8 | -0.4 | 31.0 | ||
| GDP (in billions of hryvnias) | 292.0 | 328.5 | 332.0 | 379.5 | 387.3 | 387.1 | ||
Staff report projections assume a reduction in the VAT rate from 20 percent to 17 percent in 2005 (accounting for 0.8 percent of GDP), based on the July discussions.
The budget assumes that the VAT rate is not cut in 2005 (since planned legislation has not yet been approved); and does not incorporate the recent pension increase. Note also that the actual budget numbers for revenues and expenditures are 2 percent of GDP higher than reported in the table, reflecting offset transactions.
Staff assessment of the fiscal stance in 2005 is based on the draft budget and the recently approved measures.
Corrective measures needed to achieve the target envisaged in the draft 2005 budget submitted to parliament in September.
Without corrective measures, the consolidated government deficit would rise to about 4½ percent of GDP in 2004. To finance the pension increase and clear wage arrears over the rest of the year, the government has secured the budget committee’s approval to spend HRV 4 billion of additional privatization proceeds (i.e., exceeding those projected under the amended budget). Staff estimates this additional spending to add about 1¼ percent of GDP to the staff report projection of the consolidated budget deficit. In September alone, the budget deficit was 1 percent of annual GDP. In communications with staff, the authorities have, however, reiterated their intentions to limit the consolidated budget deficit to 3 percent of GDP; this would be accomplished through a combination of more effective tax administration, spending delays, and under-spending of budget limits. In addition, the authorities have also noted that in 2002, despite parliamentary elections, government spending was successfully curbed at the end of the year when faced with budgetary difficulties; indeed the fiscal outturn was a surplus.
Given recent developments and policy measures, particularly on pensions, the draft 2005 budget, which was submitted to parliament in mid-September, is now obsolete. While the draft 2005 budget—which targets a consolidated budget deficit of 1.8 percent of GDP—appears broadly in line with staff recommendations, it does not incorporate any of the recently approved measures. Thus, in the absence of adjustment, the consolidated budget deficit in 2005 could be much larger. First, spending would be up considerably. The pension increase will add about 3 percent of GDP to the deficit. Based on higher planned foreign borrowing and staff projections for local government own revenues, the staff expects local government expenditure to be ¾ percent of GDP above budget projections. Moreover, despite local government revenue overperformance, staff projects that consolidated overall budget revenues will fall short of budget target by ¾ percent of GDP, reflecting a less optimistic assumption about improvements in VAT administration. Altogether, achieving the 2005 budget target would require corrective measures of some 4½ percentage points of GDP. The necessary adjustment would become larger if the authorities proceeded with reducing VAT rates. This measure (rate cut from 20 percent to 17 percent) envisaged during the July discussions, is not included in the budget but the Prime Minister recently announced that he would soon submit it to the Cabinet of Ministers. Again in communications with staff, the authorities have indicated they expect that the approved 2005 budget will limit the consolidated deficit to about 2 percent of GDP.
5. The authorities have budgeted substantial tax offsets in 2005.1 Total transactions would amount to HRV 7.4 billion (2 percent of GDP). Communal services arrears or a portion of the ratepayer’s current bill would be netted against (a small portion of) lost savings from the 1990s hyperinflation; agriculture sector tax arrears would be netted against a contribution to food stock building; and Naftogaz tax arrears would be netted against further efforts by Naftogaz to improve its metering. Based on past experience with offsets, these transactions may add to, rather than correct, the arrears problems since new arrears could help economic agents secure their participation in a new offset round.
6. VAT refund arrears have been drastically reduced. The authorities have indicated that VAT refund arrears declined to HRV 295 million at end-August. This result reflected (i) a large surge in securitization of these claims, virtually exhausting the securitization scheme in the 2004 budget, (ii) increased use of netting against other taxes, and (iii) a significant increase in rejections of new VAT refund claims (40 percent of claims rejected in July and August in contrast to a rejection rate of 9 percent in the first half of the year). Based on past experience, it is uncertain whether the good performance in July and August will be sustained.
Staff Appraisal
7. The recent fiscal developments require prompt correction. The significant increase in recurrent government spending, particularly pensions, resulting from the amended budget’s use of one-off privatization receipts, is inappropriate and places public finances on less firm footing, thus compromising the 2005 budget. Indeed, the authorities’ objectives of cutting the VAT rate, spending more on infrastructure and social needs, raising pensions, and reversing the fiscal expansion are incompatible. The fiscal discipline that has been implemented over the past few years has served Ukraine well and has been instrumental in bringing about strong macroeconomic fundamentals. The staff therefore urges the authorities to adopt corrective measures as soon as possible in order to prevent hard-won stabilization gains, particularly low inflation, and a sound fiscal outlook from slipping away.
Ukraine: Selected Economic Indicators, 1999–2005
Assumes an exchange rate of 5.33 Hrv/US$.
From 2003 onwards, based on an accounting treatment that excludes offset-based amortization to Russia, which decreases revenues and increases net external financing (and the budget deficit) by 0.2 percent of GDP relative to previous years.
Cash balance adjusted for the net accumulation of expenditure and VAT refund arrears, as well as for non-cash property income.
Government and government-guaranteed debt and arrears, plus NBU debt. Excludes debt by state-owned enterprises.
Annual GDP divided by end-period broad money (M3).
Period averages; (+) represents real appreciation; based on CPI and average trade weights for 1996–2002.
Ukraine: Selected Economic Indicators, 1999–2005
| 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | ||||
|---|---|---|---|---|---|---|---|---|---|---|
| Est. | Prog. 1/ | Proj. | Proj. | |||||||
| Output and employment | ||||||||||
| Real GDP (annual change in percent) | -0.2 | 5.9 | 9.2 | 5.2 | 9.4 | 6.0 | 12.5 | 6.0 | ||
| Nominal GDP (in billions of hryvnias) | 130.4 | 170.1 | 204.2 | 225.8 | 264.2 | 292.0 | 328.5 | 379.5 | ||
| Nominal GDP (in billions of U.S. dollars) | 31.6 | 31.3 | 38.0 | 42.4 | 49.5 | 54.8 | 61.7 | 75.1 | ||
| Unemployment rate (ILO definition) | 11.9 | 11.7 | 11.8 | 10.1 | 9.1 | … | … | … | ||
| Prices and wages (percent change) | ||||||||||
| Consumer prices, period average | 22.7 | 28.2 | 12.0 | 0.8 | 5.2 | 7.1 | 8.3 | 8.1 | ||
| Consumer prices, end of period | 19.2 | 25.8 | 6.1 | -0.6 | 8.2 | 6.0 | 9.0 | 7.0 | ||
| Producer prices, end of period | 15.7 | 20.6 | 0.9 | 5.7 | 11.1 | 5.5 | 20.0 | 7.0 | ||
| Average monthly wages, annual average | 16.1 | 30.2 | 34.9 | 20.7 | 23.0 | … | … | … | ||
| Consolidated budget (in percent of GDP) | ||||||||||
| Revenue 2/ | 31.9 | 33.4 | 33.5 | 36.0 | 37.0 | 37.3 | 35.5 | 33.7 | ||
| Expenditure (cash basis) | 34.2 | 34.7 | 35.1 | 35.5 | 37.7 | 39.0 | 38.9 | 35.3 | ||
| Cash balance 2/ | -2.4 | -1.3 | -1.6 | 0.5 | -0.7 | -1.8 | -3.4 | -1.6 | ||
| Primary balance (cash basis) | 0.0 | 1.8 | 0.4 | 1.8 | 0.3 | -0.4 | -2.4 | -0.6 | ||
| Commitments balance 3/ | -1.4 | 2.1 | -1.5 | 0.2 | 0.1 | -0.8 | -3.0 | -1.0 | ||
| Privatization proceeds | 0.6 | 1.3 | 1.3 | 0.5 | 1.1 | 0.8 | 2.6 | 1.2 | ||
| Net domestic financing | 1.5 | 0.3 | -0.1 | -0.3 | -1.2 | 0.5 | -0.9 | 0.0 | ||
| Net external financing 2/ | 0.2 | -0.3 | 0.4 | -0.7 | 0.8 | 0.4 | 1.7 | 0.4 | ||
| Public debt and arrears (in percent of GDP) 4/ | 66.7 | 47.0 | 38.6 | 35.7 | 30.3 | 27.7 | 27.1 | 21.6 | ||
| o.w. external debt | 39.5 | 33.1 | 26.6 | 24.0 | 21.9 | 19.5 | 19.2 | 15.7 | ||
| Money and credit (end of period, percent change) | ||||||||||
| Base money | 39.2 | 40.1 | 37.4 | 33.6 | 30.1 | 16.3 | 45.0 | 19.7 | ||
| Broad money | 40.4 | 45.5 | 41.9 | 41.8 | 46.5 | 24.1 | 43.8 | 26.7 | ||
| Credit to nongovernment | 43.5 | 61.3 | 40.5 | 47.3 | 63.4 | 25.1 | 32.5 | 28.9 | ||
| Velocity 5/ | 5.9 | 5.3 | 4.5 | 3.5 | 2.8 | 2.5 | 2.4 | 2.2 | ||
| Average hryvnia lending rate (in percent, period average) | 55.0 | 41.5 | 32.3 | 25.5 | 18.3 | … | … | … | ||
| Average hryvnia deposit rate (in percent, period average) | 20.7 | 13.7 | 11.0 | 7.9 | 7.0 | … | … | … | ||
| Balance of payments | ||||||||||
| Current account balance (in percent of GDP) | 5.2 | 4.7 | 3.7 | 7.5 | 5.8 | 3.7 | 10.2 | 4.1 | ||
| Gross reserves (end of period, in billions of U.S. dollars) | 1.1 | 1.5 | 3.1 | 4.4 | 6.9 | 7.8 | 11.9 | 13.6 | ||
| In months of next year’s imports of goods and services | 0.7 | 0.9 | 1.7 | 1.9 | 2.4 | 3.0 | 3.8 | 3.9 | ||
| Debt service (in percent of exports of goods and services) 4/ | 15.8 | 10.4 | 8.7 | 5.7 | 6.3 | 6.4 | 4.8 | 5.2 | ||
| Exports (annual change in percent) | -3.7 | 19.2 | 8.7 | 9.2 | 27.2 | 6.3 | 38.7 | 3.1 | ||
| Imports (annual change in percent) | -20.5 | 15.4 | 13.0 | 6.3 | 33.7 | 8.4 | 25.0 | 10.8 | ||
| Savings and investment (in percent of GDP) | ||||||||||
| Foreign savings | -5.2 | -4.7 | -3.7 | -7.5 | -5.8 | -3.7 | -10.2 | -4.1 | ||
| Gross domestic savings | 24.6 | 24.2 | 25.5 | 27.7 | 26.1 | 25.3 | 31.6 | 28.3 | ||
| Nongovernment | 25.0 | 23.3 | 24.0 | 24.1 | 22.6 | 24.5 | 30.7 | 26.4 | ||
| Government | -0.4 | 0.9 | 1.5 | 3.6 | 3.5 | 0.7 | 0.9 | 1.9 | ||
| Gross domestic investment | 19.4 | 19.4 | 21.8 | 20.2 | 20.3 | 21.6 | 21.3 | 24.3 | ||
| Nongovernment | 17.4 | 17.3 | 18.7 | 17.1 | 16.1 | 19.2 | 17.1 | 20.8 | ||
| Government | 2.0 | 2.1 | 3.1 | 3.0 | 4.2 | 2.5 | 4.3 | 3.5 | ||
| Exchange rate | ||||||||||
| Hryvnia per U.S. dollar, end of period | 5.2 | 5.4 | 5.3 | 5.3 | 5.3 | … | … | … | ||
| Hryvnia per U.S. dollar, period average | 4.1 | 5.4 | 5.4 | 5.3 | 5.3 | … | … | … | ||
| Real effective exchange rate, (percent change) 6/ | -16.3 | -4.4 | 6.0 | -4.1 | -6.3 | … | … | … | ||
Assumes an exchange rate of 5.33 Hrv/US$.
From 2003 onwards, based on an accounting treatment that excludes offset-based amortization to Russia, which decreases revenues and increases net external financing (and the budget deficit) by 0.2 percent of GDP relative to previous years.
Cash balance adjusted for the net accumulation of expenditure and VAT refund arrears, as well as for non-cash property income.
Government and government-guaranteed debt and arrears, plus NBU debt. Excludes debt by state-owned enterprises.
Annual GDP divided by end-period broad money (M3).
Period averages; (+) represents real appreciation; based on CPI and average trade weights for 1996–2002.
Ukraine: Selected Economic Indicators, 1999–2005
| 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | ||||
|---|---|---|---|---|---|---|---|---|---|---|
| Est. | Prog. 1/ | Proj. | Proj. | |||||||
| Output and employment | ||||||||||
| Real GDP (annual change in percent) | -0.2 | 5.9 | 9.2 | 5.2 | 9.4 | 6.0 | 12.5 | 6.0 | ||
| Nominal GDP (in billions of hryvnias) | 130.4 | 170.1 | 204.2 | 225.8 | 264.2 | 292.0 | 328.5 | 379.5 | ||
| Nominal GDP (in billions of U.S. dollars) | 31.6 | 31.3 | 38.0 | 42.4 | 49.5 | 54.8 | 61.7 | 75.1 | ||
| Unemployment rate (ILO definition) | 11.9 | 11.7 | 11.8 | 10.1 | 9.1 | … | … | … | ||
| Prices and wages (percent change) | ||||||||||
| Consumer prices, period average | 22.7 | 28.2 | 12.0 | 0.8 | 5.2 | 7.1 | 8.3 | 8.1 | ||
| Consumer prices, end of period | 19.2 | 25.8 | 6.1 | -0.6 | 8.2 | 6.0 | 9.0 | 7.0 | ||
| Producer prices, end of period | 15.7 | 20.6 | 0.9 | 5.7 | 11.1 | 5.5 | 20.0 | 7.0 | ||
| Average monthly wages, annual average | 16.1 | 30.2 | 34.9 | 20.7 | 23.0 | … | … | … | ||
| Consolidated budget (in percent of GDP) | ||||||||||
| Revenue 2/ | 31.9 | 33.4 | 33.5 | 36.0 | 37.0 | 37.3 | 35.5 | 33.7 | ||
| Expenditure (cash basis) | 34.2 | 34.7 | 35.1 | 35.5 | 37.7 | 39.0 | 38.9 | 35.3 | ||
| Cash balance 2/ | -2.4 | -1.3 | -1.6 | 0.5 | -0.7 | -1.8 | -3.4 | -1.6 | ||
| Primary balance (cash basis) | 0.0 | 1.8 | 0.4 | 1.8 | 0.3 | -0.4 | -2.4 | -0.6 | ||
| Commitments balance 3/ | -1.4 | 2.1 | -1.5 | 0.2 | 0.1 | -0.8 | -3.0 | -1.0 | ||
| Privatization proceeds | 0.6 | 1.3 | 1.3 | 0.5 | 1.1 | 0.8 | 2.6 | 1.2 | ||
| Net domestic financing | 1.5 | 0.3 | -0.1 | -0.3 | -1.2 | 0.5 | -0.9 | 0.0 | ||
| Net external financing 2/ | 0.2 | -0.3 | 0.4 | -0.7 | 0.8 | 0.4 | 1.7 | 0.4 | ||
| Public debt and arrears (in percent of GDP) 4/ | 66.7 | 47.0 | 38.6 | 35.7 | 30.3 | 27.7 | 27.1 | 21.6 | ||
| o.w. external debt | 39.5 | 33.1 | 26.6 | 24.0 | 21.9 | 19.5 | 19.2 | 15.7 | ||
| Money and credit (end of period, percent change) | ||||||||||
| Base money | 39.2 | 40.1 | 37.4 | 33.6 | 30.1 | 16.3 | 45.0 | 19.7 | ||
| Broad money | 40.4 | 45.5 | 41.9 | 41.8 | 46.5 | 24.1 | 43.8 | 26.7 | ||
| Credit to nongovernment | 43.5 | 61.3 | 40.5 | 47.3 | 63.4 | 25.1 | 32.5 | 28.9 | ||
| Velocity 5/ | 5.9 | 5.3 | 4.5 | 3.5 | 2.8 | 2.5 | 2.4 | 2.2 | ||
| Average hryvnia lending rate (in percent, period average) | 55.0 | 41.5 | 32.3 | 25.5 | 18.3 | … | … | … | ||
| Average hryvnia deposit rate (in percent, period average) | 20.7 | 13.7 | 11.0 | 7.9 | 7.0 | … | … | … | ||
| Balance of payments | ||||||||||
| Current account balance (in percent of GDP) | 5.2 | 4.7 | 3.7 | 7.5 | 5.8 | 3.7 | 10.2 | 4.1 | ||
| Gross reserves (end of period, in billions of U.S. dollars) | 1.1 | 1.5 | 3.1 | 4.4 | 6.9 | 7.8 | 11.9 | 13.6 | ||
| In months of next year’s imports of goods and services | 0.7 | 0.9 | 1.7 | 1.9 | 2.4 | 3.0 | 3.8 | 3.9 | ||
| Debt service (in percent of exports of goods and services) 4/ | 15.8 | 10.4 | 8.7 | 5.7 | 6.3 | 6.4 | 4.8 | 5.2 | ||
| Exports (annual change in percent) | -3.7 | 19.2 | 8.7 | 9.2 | 27.2 | 6.3 | 38.7 | 3.1 | ||
| Imports (annual change in percent) | -20.5 | 15.4 | 13.0 | 6.3 | 33.7 | 8.4 | 25.0 | 10.8 | ||
| Savings and investment (in percent of GDP) | ||||||||||
| Foreign savings | -5.2 | -4.7 | -3.7 | -7.5 | -5.8 | -3.7 | -10.2 | -4.1 | ||
| Gross domestic savings | 24.6 | 24.2 | 25.5 | 27.7 | 26.1 | 25.3 | 31.6 | 28.3 | ||
| Nongovernment | 25.0 | 23.3 | 24.0 | 24.1 | 22.6 | 24.5 | 30.7 | 26.4 | ||
| Government | -0.4 | 0.9 | 1.5 | 3.6 | 3.5 | 0.7 | 0.9 | 1.9 | ||
| Gross domestic investment | 19.4 | 19.4 | 21.8 | 20.2 | 20.3 | 21.6 | 21.3 | 24.3 | ||
| Nongovernment | 17.4 | 17.3 | 18.7 | 17.1 | 16.1 | 19.2 | 17.1 | 20.8 | ||
| Government | 2.0 | 2.1 | 3.1 | 3.0 | 4.2 | 2.5 | 4.3 | 3.5 | ||
| Exchange rate | ||||||||||
| Hryvnia per U.S. dollar, end of period | 5.2 | 5.4 | 5.3 | 5.3 | 5.3 | … | … | … | ||
| Hryvnia per U.S. dollar, period average | 4.1 | 5.4 | 5.4 | 5.3 | 5.3 | … | … | … | ||
| Real effective exchange rate, (percent change) 6/ | -16.3 | -4.4 | 6.0 | -4.1 | -6.3 | … | … | … | ||
Assumes an exchange rate of 5.33 Hrv/US$.
From 2003 onwards, based on an accounting treatment that excludes offset-based amortization to Russia, which decreases revenues and increases net external financing (and the budget deficit) by 0.2 percent of GDP relative to previous years.
Cash balance adjusted for the net accumulation of expenditure and VAT refund arrears, as well as for non-cash property income.
Government and government-guaranteed debt and arrears, plus NBU debt. Excludes debt by state-owned enterprises.
Annual GDP divided by end-period broad money (M3).
Period averages; (+) represents real appreciation; based on CPI and average trade weights for 1996–2002.
In principle, these offsets affect revenues and spending by the same amount. In order to facilitate the comparison with the staff report projections, they are not included in the last two columns of the text table in paragraph 4 (see footnote 2 of that table).