Budget process in 2020 will be implemented taking into account the impact of the COVID-19 pandemic

Given the uncertainty about the timing of the COVID-19 pandemic overcoming and the extent of its impact on the global economy and, in particular, the Ukrainian economy, the budget process in 2020 will be carried out with consideration of the impact of the coronavirus in the short- and long-term perspective.

The deployment of the global corona crisis has led to the introduction of quarantine in the vast majority of developed countries, which has already led to a significant decline in economic activity in the world and has a global negative effect on the dynamics of global trade.

The variability of economic forecasts for the development of different countries is extremely large. For Ukraine, the forecasts for real GDP changes this year are also in a very wide range - from rising by 1% to falling by 7.5%. At the same time, international financial institutions do not provide forecasts for the next few years: even the IMF and the World Bank provide estimates of the growth of the economies of the countries of the world only for 2020 and 2021.

According to the government’s forecast, which are the basis for the amendments of the 2020 State budget, the real GDP will decline by 4.8% in 2020. At the same time, only the forecast for 2020 was updated. High volatility in the global financial and commodity markets and a significant degree of uncertainty about the global economy this year make it impossible to develop a robust macro forecast for 2021-2023, which should form the basis of the Medium-Term Budget Declaration.

The stabilization with COVID-19 pandemic situation will allow us to develop more realistic macroeconomic projections and enable them to be used for medium-term budgetary planning, which will allow us to prepare a high-quality medium-term budgetary policy framework.

The Ministry of Finance’s efforts are currently focused at ensuring the implementation of the 2020 State budget, including the financing of activities aimed at combating the coronavirus. The approved changes to the State budget for 2020 foresee the allocation of funds for medical needs, assistance to vulnerable groups, as well as support for businesses (in particular SMEs). All the ministries continue to analyze the current situation and develop steps to minimize the negative impact of the COVID-19 pandemic.

At the same time, the Ministry of Finance will continue to implement medium-term budget planning in the budget process of Ukraine, which should provide a strategic approach in determing priority activities and allocating the scarce resources. Work is currently underway to analyze possible policies and the financial capacity to implement them over the medium-term. The Ministry of Finance is actively cooperating in this direction with the Ministry of Economy, NBU, the Ministry of Social Policy, the main spending units.

Therefore, during the drafting of the State budget for 2021, the Government will develop a vision of budgetary policy goals for the medium-term perspective.