The Russian budget: decent execution in 2020 sets a good base for 2021

RUSSIA ECONOMICS - In Brief 22 Jan 2021 by Alexander Kudrin

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The Finance Ministry reported that the federal budgetary spending massively increased in December, and in 2020 as a whole, the government expenditures exceeded R22.8 trln. In December alone, the government allocated 17.1% of the annual figure. Both figures appeared well above the expected. Meanwhile, during the last months of 2020, the government refrained from announcing how much it planned to spend in reality. The Duma granted the government the right to spend as much as was needed, but within some limit. This upper limit was moving up during the parliamentary budgetary hearings at the end of last year. It now looks as though that the difference between this upper and actual spending accounted for around R1 trln. The government can allocate it in 2021. The formally approved 2021 expenditures assume that the government should spend R21.5 trln this year. On top of that, resources unallocated in 2020 (i.e., up to R1.0 trln) can supplement the 2021 budgetary expenditures. Overall, actual federal budgetary spending will decrease this year both in real in nominal terms.It now became clear that this massive spending spree in 4Q20 helped to accelerate inflation in December 2020 and January 2021 (in the latter case, it may exceed 0.8% m-o-m and stay around 5.4% y-o-y). From March, y-o-y inflation will start slowing down, while in February, it is likely to get a bit higher.On the revenue side, the government collected over R18.7 tln (including a one-off transfer of CBR profit of over R1.1 trln it received from selling the Sberbank to the government). In December, the federal budget revenues exceeded R1,7 trln, which points to a decent economic performance in 4Q20 and sets a go...