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Ukraine’s fiscal policy in 2020-2021 to some extent stimulated aggregate demand and supported the economy and health care sector. Fiscal impulse in Ukraine was positive, both in 2020 and 2021, at 2.4% and 1.8% of GDP. We should remind that the fiscal impulse is the difference with the inverse of the cyclically adjusted primary balance (CAPB) of the current and previous periods. In this case, the CAPB is equal to the difference between government revenues and primary expenditures adjusted for the GDP gap. As a result, the positive value of the fiscal impulse indicates the period of fiscal expansion, and the negative one is during the period of fiscal consolidation.

Figure shows the dynamics of the fiscal impulse in Ukraine and different groups of countries over two years. Comparisons of the fiscal impulse in Ukraine in 2020 (2.4% of GDP) with the averages in emerging market economies (3.4%) and advanced economies (5.8%), evidence only the slightexpansionary effects of fiscal policy in Ukraine. This conclusion is confirmed by data from individual countries, in particular the Czech Republic, Slovakia, Hungary, Poland, China.

The dominant factors of quite modest indicators of the fiscal impulse in Ukraine are the limited fiscal space, limited scope for government private borrowings, insufficient external support, and archaic monetary policy of the central bank. 

Read more in the study of Doctor of Economics Tetiana Bogdan “Transforming Public Finances: Global Processes and Challenges for Ukraine”.