Page 51 - RusRPTSept20

year earlier. Budget spending has revived the economy as it has grown a lot in real terms as well. This has been supported by the fact that prices, such as consumer prices and investment prices, which are essential for the recovery of expenditure, have risen moderately and producer prices for domestic industrial supplies have even fallen.
The contraction in revenue and the increase in expenditure this year, after two years of surpluses, have turned the consolidated budget into a deficit. The deficit for the last 12 months was 1.3% of GDP in June (without the central bank surplus account, the deficit would have been more than 2% of GDP).
Almost all of the revenue items in the consolidated budget have decreased significantly. The reduction in oil and gas taxes weighed on their share of total budget revenues to 15% in the first half of the year. Other budget revenues were 5% higher in the first half of the year and the same in the second quarter as a year earlier. Excluding the central bank's surplus account, they decreased by 13% year-on-year in the second quarter.
In the second quarter, the collapse in tax revenues from corporate profits in particular (-30%) made a big cut in the budget. The decline in budget revenues from property taxes and special taxes on entrepreneurs, as well as the stagnation of dividend payments by state-owned enterprises, also had a significant impact.
Budget revenues from labor income taxes (-10%) and VAT and wage- based social taxes (both -5%) decreased much more slightly.
In addition to the dive in the second quarter of the economy, the decline in some income items is due to tax cuts and tax deferrals granted by the state in the spring.
The increase in budget expenditure has been targeted at e.g. due to the interest rate crisis, especially in health care (growth in the first half of the year 35% year-on-year) as well as in various sectors of the economy (growth 26%), mainly in the transport sector and roads. In connection with the increases in spending in these two areas, budget spending on business support, investment and the purchase of goods and services has risen unusually fast.
By far the largest item of expenditure in the budget, ie expenditure on social benefits, increased rapidly, mainly due to the fact that expenditure on family benefits almost doubled. In the midst of the interest rate crisis, spending on public administration and internal security and order also increased at a much faster pace than in previous years. The rise in defense spending accelerated in the second quarter.
51 RUSSIA Country Report September 2020 www.intellinews.com