Budgetary performance looks normal in July

RUSSIA ECONOMICS - In Brief 12 Aug 2024 by Evgeny Gavrilenkov

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The Ministry of Finance reported that in 7M23 total revenues of the federal budget exceeded R18.7 trln, which is about 56.3% of the annual target. Given that tax collection traditionally rises in 4Q, revenue performance looked not too bad, as increased inflation established a higher nominal tax base for the rest of the year. Oil-and-gas (O&G) revenues reached R6.8 trln (61.7% of the annual target) while non-O&G revenues lagged behind (53.9% of the annual target). Nonetheless, non-O&G revenues were up by 25.5% y-o-y. Federal budget expenditures reached R21.1 trln (56.8% of the annual plan), and the pace of budgetary spending was on a par with revenue flow. As a result, the deficit reached R1.362 trln, which looked well in line with the amended annual target (R2.121 trln, i.e., slightly above 2% of GDP). We believe that amid increased inflation the non-O&G monthly revenues will remain high enough so that by year-end total revenues will likely exceed the annual plan (about R35.1 trln) and may be close to R36.0 trln. It will mean a higher base for 2025 and a smaller deficit in 2024. Therefore, one cannot rule out that next year’s budgetary expenditures will keep rising again quite meaningfully. The government should submit the 2025 budget to the State Duma by October 1.