Page 73 - RusRPTSept21

pension-aged population numbers around 45.6mn (as of January 1, 2021) and that there are 1.9mn Russians serving in the military, the additional spending would total R460-480bn. We expect the federal budget to post a surplus of about R100bn this year, while there are still unspent funds from previous years. The additional social expenditures would likely put mild upward pressure on inflation next year, as the money would likely go mainly toward consumption. Based on our estimates, we believe an additional R460-480bn in social spending would add about 0.2 pp to inflation, 0.9 pp to consumption growth and 0.3 pp to GDP growth.
The Ministry of Economy is preparing ($24.2bn) from 2022-2024. The ministry’s plan would extend pandemic relaxation of the 2017 budget rule into 2022.
The 2017 budget rule requires that all revenue received from oil prices over $43/barrel be invested in the National Wealth Fund (NWF). When prices dip below $43, the NWF compensates the budget.
During the pandemic, the government has dipped into the NWF to increase spending. Currently, spending for 2022 is planned to be RUB21.9 trillion ($294.1bn), while the Ministry of Economy is proposing RUB23 trillion ($309.4bn) in spending.
AlfaBank Chief Economist Natalia Orlova suggests that spending could be increased to RUB22.5 trillion ($302.8 trillion) without needing to relax the budget rule, however she supports the Ministry of Economy’s plan and thinks it will likely be implemented.
She wrote in the August edition of AlfaBank’s Macro Insights that the high inflation rate this year calls for faster spending indexation, that the fiscal breakeven oil price is expected to be lower than expected, and that Russia’s growth is slower than the world average -- all reasons to increase spending. What makes the increase even more likely is the upcoming Duma elections in September, in which austerity will be an unpopular position.
Spending increases may keep inflationary risk high, something likely to concern Governor of the Central Bank of Russia Elvira Nabiullina.
73 RUSSIA Country Report September 2021 www.intellinews.com