Page 71 - RusRPTDec22

without transfers).
Regional budgets had a very good start of the year: the economic recovery that followed the nadir of the covid crisis still lasted, energy prices were high, helping other areas of the economy, and spending on the “National Projects” picked up.
Considering inflation, initial budgetary plans for 2022 overall envisaged only a modest growth in the "housing" and "national economy" headings, building on the revenue surpluses accumulated in 2021 and planned for 2022.
Official data suggests that things are still going great. The recorded income in regional budgets is around 79 percent overall for the first nine months of the year, which is comparable to 2021. However, if you scratch the surface, troubles are visible.
Looking at corporate income tax receipts, one finds that while most regions recorded hefty increases in H1 2022 over H1 2021, Q3 was much worse. Revenues from this tax fell well short of 2021 (and this without accounting for inflation).
Among the worst performers we can see metallurgical regions, timber-producing regions, but it is also impressive to see the bumper profits of the coal-producing Kemerovo, or even some oil and gas producing regions, turn around in Q3.
Personal income tax receipts have so far not followed this trend. Overall, they have slightly outpaced inflation over the first nine months of the year. But note that this is partly because mass layoffs haven’t started yet. 2020 was very similar in this regard.
Given the difficulties of raising money on the market, especially for poorer regions, if these trends worsen, regional budgets may either have to cut their expenses significantly (up to 15-20% or more), or hope that the federal government will pick up the bill.
In short, sanctions and mobilization will add pressure not only on the federal budget, but also on regional finances; and through it, the whole system of governance.
71 RUSSIA Country Report December 2022 www.intellinews.com