Page 48 - bne IntelliNews Russia Country report May 2017

tobacco products) and corporate profit taxes were up sharply. Revenues from the value-added tax and mandatory social contributions from firms on worker wages also increased. Consolidated budget spending rose by about 10%. The fast recovery in budget revenues produced a tiny surplus (0.2% of GDP).
The government in the last week of May submitted to the Duma its draft proposal for this year's supplementary budget. Budget revenues are now expected to increase more than in the budget approved earlier (the excess is 0.4%age points of GDP). In nominal terms, revenues should rise by 6% this year if the earnings from the Rosneft share sale are excluded from the 2016 numbers. The excess comes mostly from revenues from oil & gas taxes, with the assumption that the price of Urals oil this year will average $45.60 a barrel (the previous assumption was $40/bbl). Other additional revenues to the budget assume GDP growth of 2% this year.
Budget expenditures also rise a bit under the supplementary budget.
They are set to grow by 6% in nominal terms this year if the one-time sum given to defence industry for debt repayment is not included in the 2016 figures. Federal budget deficit will be 2.1% of GDP (earlier estimate 3.2%).
The supplementary budget calls for hardly any changes in domestic borrowing or funding out of the government's Reserve Fund (RF) and the National Welfare Fund. While the RF will be drained this year, extra oil revenues flowing to state coffers this year will be put into the RF next year.
6.1 Budget
Russia’s Federal budget deficit widens to RUB 512bn in April, or 1.9% GDP ; non-oil & gas revenues in April unchanged in year-on-year terms.
Revenues for the period totalled RUB 4.8tn, with oil and gas revenues at RUB 2.0tn and non-oil and gas revenues totalling RUB 2.8tn.
Expenditures were at RUB 5.3bn . The deficit was RUB 290bn in April and the cumulative deficit stood at RUB 512bn (1.9% GDP) for the first four months of the year.
The fiscal performance on the revenue side remains consistent. In the first four months of the year, the federal budget collected 33.0% of the planned non-oil & gas revenues (which is consistent with the budget law) and 39.1% of the planned oil & gas revenues (which is consistent with the level of oil prices, export, extraction and exchange rate).
One slight concern might be the zero increase in the non-oil & gas revenues on a year-on-year basis in April, but the intra-quarter dynamics of VAT might be responsible for that.
Expenditures are being executed according to the usual seasonal pattern
(adjusting for January’s one-off social payments). The federal budget executed 32.5% of the planned spending, which is 5% more than for the comparable four months in 2016.
The implications for monetary policy are limited at this point. The CBR has dropped references to the risks of excessive easing from its press releases this
48 RUSSIA Country Report May 2017 www.intellinews.com