Page 77 - RusRPTOct22

The federal budget has been running a deficit for at least the third month in a row. Oil and gas revenues began to decline steadily in the third quarter, but the situation with non-oil and gas is even worse, writes the MMI telegram channel. According to his calculations, “over the six months of the crisis, the decline in non-oil and gas revenues amounted to 13.7% y/y”, and in real terms, their reduction is “close to 30% y/y”. “And this is a disaster,” analysts say.
The Ministry of Finance spent money rapidly in June-July, but held back spending in August, as a result, the deficit decreased, MMI also notes. “It was the gigantic deficit in July that played the main role in the emerging stabilisation of the economy. Without budgetary support, a second wave of economic collapse will inevitably begin,” experts say. According to their forecast, the Ministry of Finance will increase spending again in the near future.
By the end of the year, the federal budget deficit may reach RUB3 trillion, or 2.2% of GDP, the Solid Figures telegram channel estimates. “The main source of financing the deficit will be the NWF, and spending from it will not be sterilised,” analysts say. As of September 1, the liquid part of the NWF was RUB8.29 trillion rubles. The Ministry of Finance predicts a deficit of RUB1.7 trillion.
Federal budget expenditures in August increased by only 8.4% y/y (after a surge in July, when expenditures jumped by 25%), and in real terms decreased by 5%, according to Hard Figures. They also assume that further costs will only grow. Vladimir Putin said last week that budget expenditures for the current year would be 20% more than in 2021. This means that they will reach RUB29.7 trillion, which is RUB2.5 trillion more than the previous targets of the Ministry of Finance and much more than the expenditures approved by the federal law (RUB23.7 trillion).
Imports collapsed after the war started as up to a 1,000 foreign firms suspended their work in Russia and others halted trade. But six months on and the parallel imports schemes have been set up to bring in consumer goods with sales recovering
somewhat.
“We expect that in the nearest future, probably in September, the surplus will turn into a deficit as the state’s needs grow amid limited revenue collections,” said Natalia Lavrova, economist at BCS Financial Group. While this year’s budget balances at $100/bbl of oil, next year’s may need $108 as revenues slide amid rising spending, she said.
The ministry doesn’t break out monthly totals and revisions can make comparisons difficult, but the latest figures suggest the monthly deficit narrowed to about RUB300bn in August from RUB900bn the month before, according to Alexander Isakov of Bloomberg Economics.
77 RUSSIA Country Report October 2022 www.intellinews.com