Page 42 - RusRPTJuly18

The Ministry of Finance refused to increase government spending due to increased oil prices The amendments also increase domestic borrowing by RUB227bn up to RUB1.044 trillion. The maximum amount of external borrowing is practically unchanged and will amount to $6.97bn. The estimated GDP of the country in 2018 in the bill is estimated at RUB98.2 trillion.
The Ministry of Finance has released its preliminary data on the execution of the federal budget for 5mo18. The cumulative surplus has climbed to RUB 459bn, close to projections of RUB 400bn. The Bloomberg-compiled consensus was nevertheless more conservative, pointing to only RUB 203bn.
While oil & gas revenues continue to outperform, non-oil & gas revenues broadly correspond to last year’s speed of execution. Federal budget spending has returned to its normal seasonal pattern, after an uptick in April (which we explored in Federal Budget - Front loaded execution in defence research and utilities soften fiscal balance in April of 16 May).
The recent key point in terms of the federal budget is the State Duma’s approval of amendments to the federal budget for 2018 at the first hearing. The proposed amendments imply an increase in total revenues of RUB 1.82tn (to RUB 17.1tn), which is almost totally driven by oil & gas revenues (+RUB 1.76bn). Consequently, there is just a RUB 62bn upward revision in spending plans. The second and third hearings in the State Duma are to take place on 19 June and 21 June, respectively.
Budget revenues are in line with our estimates. MinFin reported the headline figure at RUB 1,383bn vs. our estimate of RUB 1,398bn. The execution of the total annual revenues envisage by the current budget law is 45.4% vs. 43.2% a year ago. However, on a yearly basis, the accumulated revenues are 19% YoY higher, mostly due to the 30% YoY increase in oil & gas revenues.
Oil & gas revenues outperform due to more favourable oil market environment. The current budget law implies that 57.9% of the planned oil & gas revenues have already been accumulated, while a year ago we saw only 48.3%. This result was helped by the higher than projected oil price: while Urals is currently near USD 73/bbl, the current budget assumes USD 43.80/bbl. However, if we compare the oil & gas revenues which have been gathered to the updated version in the draft amendments (which implies oil at USD 61.40/bbl), we would get a softer execution figure of 44%.
Accumulated non-oil & gas revenues still make up 38.2%of the plan. However, this is in line with the seasonal trends (in the respective period of 2017 it was 40.1%), which implies the major part of the revenues is to be collected later in the year.
Spending has returned to its normal pattern after an uptick in April. MinFin reports RUB 1.2tn of spending in May, which corresponds to a 5mo18 execution level at 39%.
6.1.1 Budget dynamics - specific issues...
RUSSIA Country Report July 2018 www.intellinews.com
The Russian government has proposed to hike the VAT rate , Prime Minister Dmitri Medvedev told the cabinet on June 14. "The value added tax