Page 84 - RusRPTSept22

The income of the federal budget fell as much as a quarter below the level of a year ago in July. Revenues from oil and gas production taxes and export duties turned lower for the first time this year than the year before. The drop was more than a fifth.
“In June-July, the price of Urals oil was still significantly higher than a year earlier, but in rubles the price was clearly lower than a year ago. The ruble-denominated value of the oil and gas tax revenues, which are almost entirely determined in dollars, has been reduced by the exchange rate of the ruble, which was 27% higher in June-July than a year earlier,” BOFIT said in the note.
In July, revenues other than oil and gas tax revenues of the federal budget fell by almost 30% y/y. The government's income from imports has been reduced by the sharp slide in imports and the strong exchange rate of the ruble.
In May-July, income from value added taxes on imports was about 40% lower than a year earlier, and income from import duties was about 60% lower.
VAT revenues from domestic production have varied greatly in different months of this year, even though production and consumption have not fluctuated nearly the same way. In May-June, these VAT revenues were more than half of a year ago, while in April and July the y/y change was -40–50%. The fluctuations are mainly related to the rate of collection of VAT taxes and possibly also the rate of their refund.
“It is more difficult to get information about the federal budget's expenditures than before, but according to the Russian EEG research institute, the budget's expenditures were still 25% higher in July than a year earlier,” BOFIT said. “Also in the entire January-July period, the annual growth of expenses was more than 20%, i.e. faster than the rate of inflation. The rather comprehensive data on some large expenditure items in the federal budget, such as social expenditure and expenditure on various sectors of the economy, indicate that these expenditures have increased very moderately this year. The rapid growth of other expenditures points to a sharp rise in the largest items included in them, i.e. defence expenditures and internal security and law enforcement expenditures.”
The federal budget has been in surplus since the beginning of the year and was still in surplus in June of about 0.5% of GDP, but the falling revenues suggest it will go into deficit before the end of the year. Russian Finance Minister Anton Siluanov said in April that the ministry is expecting to end this year with a 2% of GDP deficit. Other economists point to the extraordinary energy-related revenues and say a smaller deficit is possible.
“The July deficit in particular was very deep. For this year as a whole, the size of the deficit is becoming a couple of percent of GDP, if the expenditures do not increase this year by more than 20% and the oil and gas tax revenues are based on the price of oil and the exchange rate of the ruble, as well as other revenues of the budget remain at the level of the past months,” BOFIT added.
84 RUSSIA Country Report September 2022 www.intellinews.com