Page 49 - RusRPTFeb20

6.1.1 ​Budget dynamics - results
Budget surplus reaches RUB2 trillion in 2019, close to 1.9% of GDP. Social spending set to rapidly increase in the next three years. ​The Finance Ministry has published preliminary budget data for last year. Budget revenues expanded 3% in 2019 to RUB20.2 trillion, with the growth coming entirely from non-oil and gas revenues, which jumped almost 18%, as oil and gas revenues shrank 12% due to the lower oil price. (Brent averaged 11% lower.)
Budget spending rose 9% to RUB18.2 trillion. Spending lagged the initial targets for most of the year, as it was up just 1.3% y/y in 1H19, but this growth surged to 13% y/y in 3Q19 and 17% in 4Q19.
In December alone, budget spending was up 22% y/y. Nevertheless, the full-year figure came in below the projected RUB18.5 trillion (the latest revised target was announced in November), though it almost hit the initial budget target of RUB18.3 trillion.
“We stress that these figures are preliminary (based on the accrual method) and are likely to be updated once information on the actual budget spending becomes available (the previous month's spending figure is usually revised lower by RUB50-100bn). The budget surplus reached RUB2 trillion last year, close to 1.9% of GDP,” Sberbank CIB said in a note.
The delayed spending was mainly due to lower than expected spending on the national projects. The government reached only 53% of its annual target for the national projects in 9m19, though this figure recovered to 91% in 4Q19.
The government had initially planned to spend RUB19.5 trillion this year (according to the budget approved in October last year). However, President Putin announced additional social spending during his Federal Assembly address last week to support low income groups and expand the "maternity capital" program, among other things.
Total budget spending could increase by an additional RUB450bn-RUB500bn in 2020 and RUB650bn next year. The exact spending figures will only become available after the first budget amendments in the spring, but we do not think the government will encounter any problem financing this new spending given the country's large ruble cash reserves and the total of around RUB1 trillion in unspent funds from previous years. Over the longer term increased social spending will require some changes to the budget rule or a revision of other types of expenditures.
49​ RUSSIA Country Report​ February 2020 ​ ​www.intellinews.com