Page 7 - RusRPTDec21

The Russian federal budget expanded the surplus to RUB2.1 trillion ($29bn) in 10M21, adding RUB0.5 trillion in October alone, beating the consensus expectations of a RUB1.8 trillion surplus for the reporting period, according to the latest report by the Finance Ministry. As followed by bne IntelliNews, Russia’s federal budget is looking in far better shape than anyone had predicted.
Despite the large reserves and strong income, the Kremlin continues to run an austerity budget and is husbanding its money for a future fall in hydrocarbon income. The government has spent money on social support programmes that have pushing average real income growth back into the black, but over all spending on social items and healthcare has remained below the relative seasonal norms since September, despite the social allocations for 2021 increasing by RUB160bn.
The government continues to diversify its revenue base with personal and profit taxes together with VAT making up a third each of the tax base, but some 20-40% of revenues are still dependant on raw materials and that revenue is likely to fall slowly in the next decade. However, in the short- to medium-term the Kremlin will have plenty of money in the bank.
The main economic problem in the short-term is still the higher than expected inflation rates. The CBR raised the key rate by 75bp in October to 7.5% as inflation has failed to respond to a string of hikes this year, but according to preliminary data at the end of November analysts believe that inflation may have peaked, although there are unlikely to be any rate cuts until the middle of the new year, say analysts.
7 RUSSIA Country Report December 2021 www.intellinews.com