Page 55 - RusRPTDec19
P. 55
Consolidated budget spending (federal, regional and municipal, and state social fund budgets) increased by 13% yoy in the third quarter. This raised the January-September growth figure to over 7 percent, which is quite close to the Finance Ministry's full-year estimate. Despite a sharp drop in oil and gas taxes, budget revenues increased by 13% in the first half of the year. Although the consolidated budget surplus for the last 12 months has contracted, it remained at 3.3% of GDP in September (4% at its peak in May).
Expenditure growth accelerated in the third quarter in almost all sections. Throughout the January-September period, the budget spending on the housing sector increased by as much as a quarter. The rapid growth in expenditure on health, which started last year, has continued (almost 13%), as has education (almost 10%). Expenditure on the various sectors of the economy rose to 8% in January-September, while social, administrative and defense expenditure increased to 5% to 6%.
Non-oil and gas tax revenues continued to grow at a brisk pace in the first quarter. The increase in VAT at the beginning of the year has contributed to maintaining the growth of VAT revenue by almost 20%. In January-September, the share of VAT revenue in total budget revenue rose to 18%, closer to the share of employers' social and oil and gas taxes (20-21%).
Russian federal budget execution in 2019 is lagging behind and in terms of unspent planned budget expenditures this is the worst year in last five years, Vedomosti daily reported on November 11 citing the report of the Audit Chamber to the State Duma budget commission.
As reported by bne IntelliNews, after a slow start in 2019 Russia's economic growth is expected to accelerate in the second half of the year on the back of monetary easing and faster public spending on national projects. But that spending is happening fast enough and Russia’s growth forecast for this year has been revised downwards several times already as a result.
The analysts were hoping that spending would rise in 3Q19. it jumped by 16% year-on-year in 3Q19 according to the report released by the Finance Ministry. The spending growth accelerated notably from 1.3% seen in 1H19, versus the 2.3% y/y revenue growth seen in the reporting quarter.
The Audit Chamber argues, however, that the unspent expenditures have tripled over the past three years, reaching RUB778bn in 2018 and possibly hitting RUB1 trillion in 2019.
Notably, the national projects that are in focus are being financed far worse than the rest of the budge, with 52% of annual plan executed by the end of September 2019 versus 63% for overall expenditures.
55 RUSSIA Country Report December 2019 www.intellinews.com
