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its plan to boost non-O&G revenues by 6% (relative to the 2016 base net of the Rosneft privatization effect).
That said, the main concern is that this dynamic may reflect not the recovery of economic activity, but the effect of measures aimed at higher collection VAT and other taxes, as reported earlier. Under these conditions, there could be a heightened appetite to use the extra non-O&G revenues, the volume of which, according to the macro forecast recently approved by the Economic Development Ministry, could amount to RUB300bn or up to RUB500bn. This could improve our GDP growth expectations, but would also send a negative signal in terms of budgetary discipline and inflationary expectations.
The Finance Ministry is preparing the revision of the 2017 budget plan, it signal a possibility of the RUB200 bn increase in annual expenditures (plus 1% y/y) in case of additional non-oil budget revenues. Additional revenues this year could mainly come from the extra dividend payments from state companies, which are under discussion at the moment. We see Minfin intention to increase expenditures as a two-goal step: on the one hand it could be a way to address increase of the protest activity, which is forcing cabinet to address decline of the population living standards; on another hand for the Minfin it is the way to set pressure on the state companies, currently unwilling to share their profits with the government.
49 RUSSIA Country Report April 2017 www.intellinews.com