Page 50 - RusRPTApr19

6.0 Public Sector 6.1 Budget
Russia's budget turns into deficit of RUB57bn in February. Russia’s Finance Ministry has published budget statistics for February, which showed 10.3% y/y growth in revenues. Over the first two weeks of this year the intake to the state coffers was up 12.2% y/y to RUB2.8 trillion ($42.9bn).
Oil and gas revenues were up by only 6% y/y in the first two months of the year, whereas non-oil and gas revenues surged 18.5% y/y, driven by the hike in the VAT rate that went into effect at the start of 2019.
Budget expenditures, meanwhile, also increased by 18.4% y/y, although because the ministry revised downward expenditures for the previous month (growth down to 0.6% from the previous estimate of 8% y/y growth), the average expenditures for 2m18 were up by only 9.8% to RUB2.5 trillion, which is in line with the government's plans to increase spending this year by 7.7%.
The budget balance turned into a deficit of RUB57bn ($873mn) in February, although it still showed a RUB310bn ($4.7bn) surplus in 2m19. “Given our forecast for the oil price at $70/bbl for this year, we expect the budget surplus to reach 2.7% of GDP,” Sberbank CIB said in a note. Russia finished 2018 with an surplus of 2.7% of GDP.
Revenues to Russia’s consolidated budget (federal, regional and municipal budgets plus state social funds) increased by about 20% in 2018. The ratio of revenues to GDP climbed to over 35% – the highest level in ten years. Nearly half of the increase in revenues came from oil & gas tax earnings, which now account for almost a quarter of total consolidated budget revenues. The share hit 28% in peak oil price years.
Other budget revenues were up by nearly 14%. Revenues from corporate profit taxes and value-added taxes rose most swiftly and at the fastest rate since 2011. Other key categories, particularly revenues from mandatory payroll social contributions and labour income taxes, showed substantial increases. This reflects further improvements in tax collection.
After a few lean years, consolidated budget spending was up by about 6% last year, i.e. a couple of percentage points higher than inflation. The ratio of spending to GDP fell to around 33%, about the same level as in the early years of the current decade. The biggest spending increases were seen in health care (18%) and education (12%). Much of the higher spending came as these sectors received large wage increases last year based on earlier state decisions. The increases in education spending were focused on preschool, primary education and vocational training. The rise in spending on civil administration accelerated to nearly 10%, focused, among others, on funding tax, customs and financial market supervisory authorities. Spending on the economy increased only slightly, although brisk spending increases on roads continued.
Housing sector spending rose last year on housing-related infrastructure, whereas spending on housing specifically again turned to decline with the slowdown in the boost of major projects in Moscow and continued drops in
50 RUSSIA Country Report April 2019 www.intellinews.com