Federal budget deficit moderate in September as expenditure growth didn’t impress yet

RUSSIA ECONOMICS - In Brief 13 Oct 2020 by Alexander Kudrin
The Finance Ministry announced that both the oil-and-gas revenues and revenues not associated with this industry continued to rebound in September as total revenues exceeded R1.5 trln (versus around R1.3 trln in July and August each month). In 9m20, total revenues reached R13.2 trln, including over the R1.1 trln from the peculiar transaction in April, which was associated with the sale of Sberbank (GKEM Analytica broached this issue in detail in the past).In September, federal budget expenditures rose to R1.7 trln - up from around R1.5 trln in August, but down from nearly R1.9 trln in July. Hence, no major acceleration of expenditure growth seen in recent months. Therefore, the budget deficit was moderate both in September (R209 bn) and in 9m20 (close to R1.8 trln). That being said, the government spent around R15 trln, which is slightly over 75% of the “pre-pandemic” annual target, i.e. was on track to smoothly reach it. Meanwhile, it may indicate that the Russian business went through a difficult period in April-September largely on its own, i.e. with very limited stimulus from the government.The pandemic reality, however, prompted the government to promise a massive increase in spending this year. The new draft plan suggests that instead of the pre-pandemic R19.7 trln federal budget spending should rise up to 22.6 trln, i.e. by around R2.9 trln. If so, then the government will need to spend R7.7 trln until year-end. The task is quite challenging, especially if to think about efficient spending.These issues will be thoroughly discussed in the forthcoming report, which is due on Thursday.Evgeny GavrilenkovAlexander Kudrin

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