Page 63 - RusRPTNov20

2021​23 to the State Duma​. MinFin is planning a deficit of 4.4% of GDP for this year, 2.4% for 2021, 1.0% for 2022 and 1.1% for 2023. That would result in net debt issuance decreasing from this year’s RUB4.4 trillion to RUB2.9 trillion in 2021, RUB2.1 trillion in 2022 and RUB2.4 trillion in 2023.
Russia’s Duma approved a new budget in the first reading on October 28.
The biggest risk in the new budget stems from the official macro forecast that underlies the bill.
Sceptics, citing a new wave of pandemic that is accompanied by falls in domestic and external demand, criticize the government for an optimistic view of the future (Russia’s GDP is expected to fall by 3.9% y/y this year and to grow by 3.3% next year).
At the same time, the left – Communists and Just Russia voted against the bill – insist that the state should have increased its support for the economy through tapping into its reserves.
So far this year’s budget is following expectations but will suffer a heavy blow thanks to being hit on both the revenue and expenditure sides due to the double whammy of the oil price collapse and the coronacrisis, which each hurt the opposite sides of the balance sheet.
“The updated official forecast suggests a shift from a 1.8% GDP surplus in 2019 to a 4.4% GDP deficit in 2020, close to our -4.5% GDP forecast. The drop in oil output and prices explains 2.4 percentage points of the overall deterioration in the budget balance vs. 2019, while the increase in spending accounts for 4.5ppt, representing the main bulk of the fiscal stimulus,” says Dmitry Dolgov, chief economist with ING in Moscow.
“The revenue side of the budget this year is supported by one-off 1.0% GDP proceeds, which were generated from the handover of the controlling stake in Sberbank from the Central Bank to the Finance Ministry. This was an off-market transaction, without, which the non-fuel revenues of the budget would have shrunk by 0.2ppt GDP in 2020 vs. 2019,” Dolgov adds. “The non-fuel revenue (including the one-off proceeds) is expected to increase 4% year-on-year in 2020, while expenditure growth is targeted at 24%. Both guidelines appear generally realistic given their 8M20 performance of +6% y/y and +26% y/y, respectively. Meanwhile, given the performance in July-August, we would not exclude underperformance on both sides, which would be largely neutral for the final result.”
The new budget forecasts a slightly better budget deficit performance, but which is expected to persist for the next three years. Russia recorded a government budget deficit of RUB1.78 trillion in September of 2020, significantly worse than the RUB200bn in April.
63 ​RUSSIA Country Report​ November 2020 www.intellinews.com