Page 104 - RusRPTMar23

“The decline in the budget’s oil revenue is expected, but the 30% drop in domestic consumption linked-taxes is ominous,” Alex Isakov of Bloomberg Economics commented. “We expect oil revenue to continue to under-perform throughout the year bringing the deficit to 1.5% of GDP above government projections.”
Oil and gas revenues in 2023 will reach RUB7 trillion instead of the planned RUB8 trillion, according to Isakov, while expenses will increase this year to RUB31 trillion instead of planned RUB26.1 trillion. The result will be the annual budget deficit will more than double from the planned RUB2.9 trillion to as much as RUB6.9 trillion.
The Solid Numbers telegram channel, created by VTB Capital analysts, say that the January result is probably an aberration and that the result cannot be extrapolated for the full year. A similar phenomenon was observed at the start of the war when oil revenues collapsed due to self-sanctioning by oil traders in the first months, only to recover as new routes and customers were found. VTB Capital analysts expect revenues to recover in the coming months and expenditures to fall again.
“However, the plan of the Ministry of Finance for a deficit of RUB3 trillion, most likely, will not be able to be fulfilled,” the authors of the channel write as cited by The Bell.
The VTB Capital analysts also say that if high spending continues at the rate of RUB32-33 trillion a month then even if revenues do not fall from the planned RUB8 trillion for oil and gas and RUB17 trillion for non-oil then the deficit could blow out to RUB7-8 trillion this year.
Currently the budget for 2023 has been drawn up with the same deficit as in 2022, a deficit of 2% of GDP, and an average annual price of Urals of $70.1 per barrel.
“It is likely that anonymous officials are not lying and a significant part of the January failure is due to "paper" reasons. But even with this assumption, the budget earns less than the plan, and spends much more than the plan. A deficit of RUB6-8 trillion for the budget is far from fatal, but this is a very large figure - 1.5-2 times more than it was during COVID in 2020, or exactly the same as the liquid part of the National Welfare Fund now,” The Bell said in a comment.
104 RUSSIA Country Report March 2023 www.intellinews.com