Week's balance: President vows support to businesses, energy ministry raises electricity tariffs, while industrial output drops
President of Ukraine Volodymyr Zelensky has promised to support businesses in the face of tougher quarantine bans, the new acting energy chief announced the coming increase in electricity tariffs for households, while the State Statistics Service reported a higher pace of industrial output slide – these are the key economic developments of the outgoing week.
The last week of autumn was marked by new coronavirus spikes. The weekend quarantine, which started in early November, affected many domestic entrepreneurs, and a New Year's lockdown is still looming ahead.
In this regard, Head of State Volodymyr Zelensky announced an initiative to support businesses affected by the government's quarantine restrictive measures.
The president promised in the near future to submit to the Verkhovna Rada a bill providing for compensation for the payment of a single social contribution (SSC) for employees at enterprises whose operations were suspended. This is a total of almost UAH 1.5 billion for about 120,000 legal entities.
"If due to tougher quarantine your operations get prohibited, you will receive compensation for the payment of SSC for your employees. A small coffee shop employing five people will receive compensation of about UAH 8,000-10,000. Of course, all these programs will be available not only to cafes, but also to everyone who has been affected by quarantine," the president said.
He also said bills had been submitted to the Rada providing for the payment of one-time financial assistance to businesses and workers whose field of activity will suffer from increased quarantine.
By the way, Zelensky has already submitted to parliament a bill on social support for insured persons and business entities for the period of restrictive anti-epidemic measures.
The Cabinet also decided to support businesses by extending until the end of the year the program of financial support for entrepreneurs who use the simplified taxation system of the first and second groups, and also have children. That is, the support program for private entrepreneurs will be extended, which was in effect in May-August. In this way, the government intends to compensate for the losses incurred in November and December by entrepreneurs.
As Prime Minister Denys Shmyhal noted, it is about paying UAH 2,000 for each child under the age of 10. In general, funding for the program will amount to UAH 1 billion by year-end.
Harmonization of 2021 budget
At the end of the outgoing week, the government approved the draft law "On the state budget of Ukraine for 2021", finalized for second reading. The document has been submitted to the Verkhovna Rada for futhr consideration.
According to PM Shmyhal, the revised bill provides for a deficit of the state treasury next year at 5.5% of gross domestic product, revenues – at UAH 1.092 trillion, expenses – at UAH 1.328 billion.
"We've done a lot of joint work and consultations with people's deputies, experts, took into account most of the proposals, based on the priority of expenditures, the existing possibilities of the ervenue part of the budget and the current state of the national economy. The key aspect is that the budget remains balanced and realistic for implementation," the prime minister said.
Finance Minister Serhiy Marchenko said that during the drafting of the budget, more than 2,500 proposals were received from the people's deputies, most of which were taken into account. There was also a budget dialogue with the IMF.
"In the process of finalization, we consulted with the mission of the International Monetary Fund to form a joint vision of the main budgetary indicators within the framework of the partnership between Ukraine and the IMF, the framework of revenues, expenditures, and deficits. In general, the parameters of the 2021 budget coincide with the estimates of the Fund's experts, which was important for continuing successful cooperation between Ukraine and the IMF," the minister noted, adding that an opportunity was found to reduce the state budget deficit from 6% to 5.47% of GDP.
Prospects of rising electricity prices
In the outgoing week, a new acting Minister of Energy Yuriy Boyko said he considered it important to revise the current cross-subsidization mechanism from 2021, according to which households receive electricity at a reduced price.
"The next priority is to reduce cross-subsidization. Behind this phrase is the objective need to revise the approaches to the formation of tariffs for household consumers. Since today there is a large number of manipulative statements about the final cost of electricity for the population," he said.
According to him, as of November, the current tariffs cover only the cost of transporting electricity through the networks.
"So, in total, delivery costs UAH 1 03 kopiykas, and the weighted average price of one kWh for a household consumer for the last two months is statistically UAH 1.04. That is, in fact, within the framework of the current model, according to which Energoatom and Ukrhydroenergo sell electricity to the Guaranteed Buyer at 1 kopiyka, only the supply is being paid for," Boyko explained his position.
He also said that next week the ministry may submit a proposal on new approaches to the formation of tariffs for the population.
At the moment, in Ukraine, the price of electricity for the households is 90 kopiykas per 1 kWh with a consumption of up to 100 kWh, and over that - 168 kopiykas per kWh. It has remained unchanged since 2017. Prices for residential consumers have not been rising due to the Special Obligation Mechanism imposed on power generating companies.
Higher pace of industrial output decline
In the outgoing week, the State Statistics Service reported that the decline in industrial production in Ukraine in October 2020 accelerated by 5% on year, without calendar adjustment after falling by 4.4% in September.
With such adjustment, industrial output in October slid by 3.9% on year.
Compared to the previous month, industrial production in October increased by 5.8%, excluding calendar adjustments, and decreased by 0.5% with such adjustments.
As for the drop in production in the context of the main activities, the extractive industry and quarrying in October saw a drop of 2.5% on year, the processing industry – saw a decline of 6.6%, and the supply of electricity, gas, steam, and conditioned air was down 1.8%.
In the context of the main industrial groups, the annual production decline for investment goods amounted to 19.3%, for consumer goods of short-term use – to 6.1%, and for energy – to 3.4%.
Only the production of consumer durables showed positive dynamics, with a growth of 5.4%.
Next week, a calendar winter with frosts and snowfalls will come to Ukraine. The deputies will gather for a plenary session and, possibly, pass the law on the state budget for 2021.