Page 34 - RUSRptAug18

projected revenues.
Oil & gas revenues continue to outperform , while non-oil & gas revenues are still below 50% of the plan.
Spending is broadly in line with seasonal trends . The cumulative federal budget surplus has already climbed to RUB 877bn, in line with our forecast of a 2018F surplus at RUB 1.2tn, or 1.2% of GDP.
Spending is close to the upper bound of the normal seasonal range.
MinFin reports that in June, the federal budget spent RUB 1.4tn. That, on our calculations, was close to the upper bound of the seasonal pattern. Accumulated, it corresponds to 47% of the plan (both initial and adjusted). By way of comparison, in 2017 we saw 46% and 45%, respectively.
Revenues in line with bankers estimates . While analysts expected to see RUB 1,740bn, the MinFin print was just a hair less (RUB 1,714bn). The discrepancy mainly came on the back of oil & gas revenues, which we estimated at RUB 798bn but were reported at RUB 760bn. That can be traced to the more upbeat Urals forecast for June ($74.50/bbl. vs. $73.10/bbl), which is used for predicting export duty revenues in the current month. According to the formula, MET revenues come to the budget with a one-month lag, while funds due to the export duty are transferred immediately.
Budget has collected 54% of oil & gas revenues . As before, oil & gas revenues were helped by the favourable oil market backdrop. The speed of the execution outperforms that in 2017 (51%), and the print is even more impressive when compared with the initial plan for 2018 as a whole (72%).
Non-oil & gas revenues marginally stronger than expected . MinFin reported its estimate of RUB 953bn, while our calculations predict RUB 942bn. While revenues from domestic VAT exactly matched the published figure, the VAT on imported goods and company profit tax surprised on the downside (with errors of RUB 23bn and RUB 14bn, respectively). The shortfall was offset by the more upbeat collection of domestic excises and other revenues.
Non-oil & gas revenues for the first half of 2018 make up 48% of the amended plan . To compare, in 1H17, their performance was slightly weaker (47% of the final amount of non-oil & gas revenues).
With average $RUB at 60.5, Urals at $53.1/bbl and the economy growing 2.2% in 2018F, we see the 2018F federal budget surplus at RUB 1.2tn.
6.1.1 Budget dynamics - specific issues...
Russia’s Federation Council (upper house) approved the law on the VAT (value-added tax) rate increase from 18% to 20% and adjusted rates of social payments, at a plenary session on July 29. VAT reliefs, such as reduced tax rates for food, children's goods, medical goods, as well as zero rates for domestic interregional air transport, will be retained. The bill also envisions the reduction of the aggregate tariff of insurance premiums to state off-budget funds from 34 to 30%, and sets the tariff of insurance contributions to the Pension Fund at the rate of 22%.
34 RUSSIA Country Report August 2018 www.intellinews.com