Page 67 - RusRPTAug21

6.0 Public Sector
MinFin reports that the 1H21 federal budget surplus has widened to RUB0.63tn, exceeding the Bloomberg consensus estimate of RUB0.35tn.
The federal budget surplus for FY21 could be as high as RUB0.20.7tn, or 0.20.6% GDP, according to VTBC calculations.
The current budget law assumes a RUB2.8tn, or a 2.4% GDP deficit for 2021, while the Bloomberg consensus anticipates a deficit of 0.7% GDP for this year.
From the monetary policy perspective, the fiscal story does seem to be disinflationary: i) in June, outlays had already reverted back from seasonally high rates to more typical patterns. ii) Federal budget expenditures tend to fall short of MinFin's appropriations for the full year: for instance, in 2020, actual spending was RUB1tn below MinFin's allocations (the most recent allocations for 2021 equal RUB22.7tn, whereas the budget law suggests RUB21.5tn of spending).
Together with employment being already close to pre pandemic peaks, the fact spending is settling at the normal seasonal levels supports the view that the potential for catch up recovery has narrowed, and that economic activity will decelerate towards YE21.
6.1 Budget
The just-unveiled parameters of the 2021-23 federal budget were generally in line with what was previously disclosed in the media.
Revenues are expected to climb to RUB18.8 trillion in 2021, up from RUB17.9 trillion in 2020, and then rise to RUB20.6 trillion in 2022 and RUBR22.3 trillion in 2023.
Expenditures will shrink to R21.5 trillion in 2021, down from R22.6 trillion in 2020. The higher spending this year was due to measures taken to combat the pandemic. Nominal expenditures are then slated to rise to R21.9 trillion in 2022 and to R23.7 trillion in 2023.
As a result of these plans, the budget deficit is expected to shrink to RUB2.8 trillion (2.4% of GDP) in 2021, versus RUB4.7 trillion (4.4% of GDP) in 2020. In 2022-23, the deficit is set to stabilize at RUB1.2-1.4 trillion (1.0-1.1% of GDP).
The main source of financing the deficit in 2020-23 will be borrowing, which will even exceed the budget deficit over all three years. Next year, net borrowing is expected to slide to R2.9 trillion, down from R4.4 trillion this year. In 2022-23, it will stabilize at R2.1-2.4 trillion, thus substantially exceeding the expected budget deficit.
The reason for this is that the government plans to start accumulating
67 RUSSIA Country Report August 2021 www.intellinews.com