Page 63 - RusRPTNov19

bottom of the range suggests that the NWF’s liquid assets will likely continue to expand in the coming years, we think.
• Net borrowing is to rely predominantly on the domestic market, while external debt is set to remain roughly level over the next three years.
MinFin plans to place up to an equivalent of $3.0bn of Eurobonds per year in 2020-22, which is close to the average redemptions for the period: $5.0bn in 2020, $0.5bn in 2021 and $2.5bn in 2022.
Net issuance of RUB-denominated domestic debt is to total RUB 1.7tn (gross issuance RUB 2.3tn), climbing to RUB 1.8tn in 2022.
• Privatisation plans mention six companies, but such proceeds are not accounted for by the budget due to their perceived uncertainty.
The government’s documents mention plans to sell parts of the public holdings of RusHydro, Sovcomflot, Transneft, Rostelecom, Rosseti and United grain company. However, no particular guidance has been provided as to the timing or pricing. Total privatisation proceeds are set at RUB 11.3bn for 2020 and RUB 3.6bn for both 2021 and 2022.
The Audit Chamber released an unsparing assessment of the draft federal budget for 2020-22 on October 16 that challenged the government’s projections of economic growth and rising incomes and criticized the structure of planned budget spending.
The draft federal budget foresees a base scenario of 1.7% GDP growth in 2020 and 3.1% growth in 2021. The Audit Chamber thinks this economic breakthrough is unfounded.
While Russia’s economy ministry explains that GDP will accelerate because investment in fixed assets will pick up from 2% growth in 2019 to 5% in 2020 and 6.5% in 2021, the AC doesn’t buy it.
In the first half of 2019, investment growth was just 0.6%. Furthermore, MinEkonomiki’s projections don’t align with current growth rates of machinery production, construction, imports of investment goods.
All told, the AC believes Russian GDP growth has a ceiling of 1.5-2% in 2021-22, a whole percentage point below MinEkonomiki’s base scenario.
Real disposable incomes will remain stagnant
Given the planned structure and amount of budget spending, the government’s projections of real disposable income growth, from near-zero in 2019 to 2.3% in 2022, are also unrealistic.
This means the poverty rate won’t fall as the government projects, from 12.5% in 2019 to 9.4% in 2022.
On the contrary, poverty in Russia is growing, the AC notes. In the first half of 2019, 13.5% of the population (19.8mn people) lived below the poverty line, a 0.2pp increase from last year.
Projected budget revenues are too high. The AC believes the budget may under-receive almost 715bn rubles ($11bn) in 2020-22 due to the government’s overestimation of tax revenue and dividend payments by state-owned enterprises.
The Ministry of Finance’s dividend forecasts, which envision the budget receiving 50% of net profit from most SOEs, are 13-25% higher than the Federal Agency for State Property Management’s (Rosimushchestvo’s).
63 RUSSIA Country Report November 2019 www.intellinews.o