The recommendation of the International Monetary Fund to cut Ukraine's budget deficit in 2013 to 2-2.5% of GDP during the crisis may lead to suppression of growth of the Ukrainian economy, Executive Director of the Bleyzer Foundation Oleg Ustenko told a roundtable in Kyiv Thursday.

"We expect next year's budget deficit in Ukraine at 3.5% of GDP. This is clearly not consistent with the concept now offered by the IMF. Far as we understand the negotiation process, they talk about planning a deficit of 2.5% of GDP, or maybe even 2% of GDP. This would mean to depress economic growth in the country," Ustenko said.

As explained by the economist, the problem is that during the crisis, the fiscal multiplier varies for Ukraine in the range of 0.9% to 1.7%, i.e. with budget deficit reduction by 1% there is a risk that the economy may fall from 0.9% to 1.7%. This is a serious blow for any system, and for a small open economy as Ukraine it could be a huge blow.

"If we have 2.5% growth in the budget deficit in 2013, we may lose about 1.5% of economic growth. This is an extremely dangerous moment that requires a further study," the expert said.

In his opinion, the government should not by any means achieve an absolute reduction in the state budget deficit.

"We expect that the government will go in that direction very carefully. This is exactly what the IMF calls on the state of Ukraine, the Cabinet of Ministers and the Ministry of Finance. But this direction must be very carefully used and constantly monitored," Ustenko underscored.


 

Ukrinform