Page 87 - RusRPTJan23

“To put this into perspective, during the pandemic in 2020, when most regions faced a significant drop in economic activity for extended periods, the consolidated deficit was RUB677bn ($10.5bn), BMB analyst Andras Toth-Czifra wrote. “Consider also that most regions started the year on a positive note, increasing their revenue over 2021.” As of October, only eighteen regions (of a total of 83 plus two occupied territories in Ukraine) were in deficit. The situation is worse in coal-producing and metallurgical regions. While overall the CBR report describes the economic situation as a mixed bag, it notes a couple of key problems: the reduction of investments in Central Russia and in the Urals and transit bottlenecks in the East, both on rail and in seaports.
The federal budget may increase transfers to regions if needed, but the situation will remain difficult. For 2023, the Central Bank expects a consolidated deficit of RUB1.4 trillion.
Regions as a whole will be reducing their expenses by 3.1%, even though the pressure on regional budgets to prop up the finances of citizens and local economies will not ease. This may lead to increased friction between interest groups that court public money, but also to cuts in expenses associated with weaker players. In the Arkhangelsk Region, for instance, local authorities are proposing cutting a number of social obligations to replenish the region’s reserve fund. Meanwhile, Chuvashia seems to have run out of funds to support families with children after the regional budget allocated RUB400mn ($6mn) to supporting draftees’ families.
Regions will also continue to face uncertainties regarding their revenue streams, as the outlook for export-oriented industries remains negative. Coal production in the Kemerovo Region, for instance, has fallen by 10% this year, despite significant demand before August (when EU sanctions entered into force). Furthermore, the planned expansion of railway links to Asia aiming to increase throughput will likely suffer further delays.
Regional finances continue their slow downward trajectory in December.
Due to a sustained fall in corporate income tax receipts, total tax receipts were 6.6% lower than a year ago in October, according to fresh figures, Andras Toth-Czifra of FPRI BMB reports.
While year-to-date nominal tax receipts remain higher than in 2021, they surpassed inflation only in one-sixth of the regions. Corporate tax receipts, especially in oil, gas, and coal producing regions were very high in the first half of the year, but started falling in the third quarter.
Worsening industrial production figures are not bankrupting regions just yet; most are on track to meet their income targets for 2022. In some cases (e.g. regions relying on metallurgy as their main industry), the drop reflects not only the sharp fall this year but also the large profits of last year.
87 RUSSIA Country Report January 2023 www.intellinews.com