Page 38 - Russia OUTLOOK 2022

Overall revenues are expected to climb to RUB18.8 trillion in 2021, up from RUB17.9 trillion in 2020, and then rise to RUB20.6 trillion in 2022 and RUBR22.3 trillion in 2023.
Expenditures will shrink to RUB21.5 trillion in 2021, down from RUB22.6 trillion in 2020. The higher spending this year was due to measures taken to combat the pandemic. Nominal expenditures are then slated to rise to RUB21.9 trillion in 2022 and to RUB23.7 trillion in 2023.
As a result of these plans, the budget deficit is expected to shrink to RUB2.8 trillion (2.4% of GDP) in 2021, versus RUB4.7 trillion (4.4% of GDP) in 2020. In 2022-23, the deficit is set to stabilise at RUB1.2-1.4 trillion (1.0-1.1% of GDP).
The main source of financing the deficit in 2020-23 will be borrowing, which will even exceed the budget deficit over all three years. In 2022, net borrowing is expected to slide to RUB2.9 trillion, down from RUB4.4 trillion in 2021. In 2022-23, it will stabilise at RUB2.1-2.4 trillion, thus substantially exceeding the expected budget deficit.
The reason for this is that the government plans to start accumulating additional oil and gas revenues in the National Welfare Fund (NWF) to the tune of about RUB0.7 trillion in 2022 and RUB0.8 trillion in 2023.
• Debt and gross international reserves
Russia’s gross international reserves remained at an all time high of around $625bn as 2021 came to an end, partly thanks to an IMF grant of $17.5bn in September as part of a global COVID-recovery package.
The National Welfare Fund (NWF) held $185bn or about 12% of GDP in December, down slightly from $197bn in November.
Under the new budget the funds in the NWF are expected to increase in the coming years as Putin ruled that the cap on spending funds in the fund be lifted from 7% of GDP to 10%. The so-called liquid funds in the NWF have been used to finance state infrastructure projects and other long-term projects that are part of the national projects programme.
The increase in the cap suggests that Putin is anticipating more sanctions pressure from the West as Russia already has almost two years of import cover as reserves, which are far in excess of what is needed to ensure the stability of the currency. What the huge reserves do is make Russia sanctions-proof and are seen by the Kremlin as a strategic necessity.
Building up such enormous reserves means Russia has effectively been running an austerity budget for years that has hobbled growth whereas if these
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