Balance of payments and budget remain reasonably stable

RUSSIA ECONOMICS - In Brief 12 Sep 2024 by Evgeny Gavrilenkov

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The CBR reported that the current account surplus reached $40.5 bln in 8M24 (in August alone, it was $2.5 bln). As the oil prices have been on a downward trend since July, Russia’s exports also declined, having reached $33.0 bln in August (in May and June, exports were about $36.6 and $35.4 bln). As imports remained relatively stable and fluctuated around $25.0 bln in recent months, some narrowing of the current account looks natural – especially combined with a bit more negative services balance as imports of services increased due to summer holiday travels (to “friendly” jurisdictions). Therefore, some weakening of the ruble also looked natural (and desirable also). A weaker ruble helped to collect more taxes. The Ministry of Finance reported that in 8M24, the federal budget deficit was slightly above R0.3 trln, as in August, it was in surplus that exceeded R1.0 trln. The 2024 budget assumes a yearly deficit of slightly over R2.1 trln. Last month, the budget was in surplus due to reasonably stable revenue flow alone but also because budgetary spending temporarily slowed. In 8M24, the government collected 65.7% of yearly targeted revenues, with oil-and-gas revenue collection close to 68.8% of the full-year target. The government allocated only 62.8% of the annually budgeted expenditures in 8M24. All in all, it looks like inflation will remain elevated for the rest of the year as budgetary spending will be less thrifty – implying robust non-O&G revenue flow. Another conclusion is that by year-end, revenues will exceed the yearly target - leaving more room for the government to again inflate spending in 2025.