Page 51 - bne IntelliNews Russia Country report May 2017

covering the period 2011-20. It initially carried a headline budget of RUB20tn for the procurement of new armaments and upgrades to existing systems. The programme’s objective is to bring the share of modern systems in the standing army to 70% by 2020 (from 10-20% in 2010). Back in 2010, the RUB20tn price tag was equal to 43% of 2010 GDP, or 4.3% of GDP per annum over ten years. The RUB17tn on the table today is some 19% of 2017F GDP per annum over eight years, or 2.4% of GDP per annum. The 2011-20 SAP was substantially ‘reprofiled’ after 2014 in the face of the harsher budget constraints and, hence, the current run rate is less than this original number (although substantially above the 2018-25 SAP reported numbers). This moderation in the outlay on armaments is a substantial contributor to the task of balancing Russia’s federal budget over the next three years being pursued by the Ministry of Finance.
6.1.2 Budget dynamics - amendments to plan
Amendments made to the 2017 budget in May confirm commitment to macro stability, positive for CPI, negative for GDP.
The Finance Ministry (MinFin) provided amendments to the federal budget for 2017 based on revised macro forecasts given by the Economic Development Ministry.
● The MinFin and Economic Development Ministry still based their estimates on conservative expectaions that the oil price would fall to $40/bbl, so the projected average annual Urals price and RUB/USD exchange rate were only changed marginally – from $40/bbl to $46/bbl and from 67.5 to 64.2, respectively. Under this scenario, additional oil and gas budget revenues should amount to RUB 0.7 trln in 2017, including RUB 0.6 trln in February-December, which pushes up the expected volume of FX purchases for gross replenishment of the country’s Reserve Fund through this year.
● GDP growth forecast was noticeably upgraded – to 2.0% YoY,
51 RUSSIA Country Report May 2017 www.intellinews.com