Russia is back as a twin-surplus economy in 2021

RUSSIA ECONOMICS - In Brief 12 Nov 2021 by Alexander Kudrin

---

The Finance Ministry reported that in 10M21 federal budget revenues exceeded the formally approved annual budget plan by 8.9%. Oil-and-gas revenues exceeded the annual plan by 21.8%, while the non-oil-and-gas revenues were higher than the annual target by 2.8%. Total revenues reached R20.4 trln while expenditures approached R18.3 trln. Therefore, the federal budget posted a surplus of over R2.1 trln in 10M21 (over R0.5 trln in October alone). The government hinted it would amend expenditures and increase them from initially budgeted R21.5 trln to R24.0 trln. If so, then in November and December the government should spend R5.7 trln or over R2.8 trln per month on average. Note that in October the government spent less than R2.0 trln. As often happened such uneven spending of the public money was always inflationary. Inflation will remain elevated in November-December, even though it reportedly decelerated during the week of short lockdown in early November (to 0.09% w-o-w compared with nearly 0.3% w-o-w inflation some weeks before).As inflation remains elevated and the oil price is high, in 2021 as a whole, federal budget revenues can reach R24.6 trln ruble (if not more) while the initial target was at R18.8 trln. Well overshooting the target will imply the federal budget surplus to remain in 2021 as a whole (it may exceed R0.6 trln and will be slightly below 0.5% of GDP).Meanwhile, the CBR reported its flash estimate of the current account surplus in 10M21. It widened to $94.4 bn as energy prices increased in recent months, while the demand for FX from households was limited as foreign travels remained complicated due to the pandemic. In 2021 as a whole the current acc...