Page 7 - bneIntelliNews monthly country report Russia May 2024

growth in consumer lending, CBR governor Elvia Nabiullina said that despite high borrowing costs, Russia’s corporate loan portfolio grew by 20% in 2024 — meaning the high rates that the Duma criticised throughout the year did not prevent businesses from borrowing. “If we had not increased the key rate, then inflation would have been much higher than the 7.4% that we achieved at the end of last year,” she said.
However, despite the high rates and high inflation, nominal wage growth is increasing even faster leaving positive real income growth that fuelling something of a consumption boom that is driving growth and also generating extra tax revenues through VAT, which was contributing as much as oil exports in 3M24 to the budget.
As Russian corporates have no access to external funding the high rates are not inhibiting domestic borrowing. At the same time in addition to helping to generally cool an overheated economy, the high rate also reduces the finance ministry’s appetite to finance its own spending through borrowing. “Our bond rates have gone up. Now 10-year papers are being bought at a rate of 13.4%. That’s expensive,” Finance Minister Anton Siluanov said, which is also helping the government to remain relatively prudent.
Preliminary figures from Russia’s finance ministry show that federal budget revenues and spending increased sharply in January-March. Federal budget spending rose by 20% y/y in the first quarter. The finance ministry also reports that spending this year has been slightly front-weighted due to certain prepayments. Russia no longer releases detailed information on realised federal budget spending. But that was offset by higher than expected oil and gas revenues, up 79%, and non-oil and gas revenues up a robust 48%, reducing the deficit to a modest RUB600bn, or 0.3% of GDP.
7 RUSSIA Country Report May 2024 www.intellinews.com