Federal budget execution numbers confirm the economy is adaptable enough

RUSSIA ECONOMICS - In Brief 18 Jan 2024 by Evgeny Gavrilenkov

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A few days ago, the Ministry announced preliminary federal budget execution numbers, suggesting that the macroeconomic policy helped the economy weather several storms caused by external pressure. Soon after the relations between Russia and the West appeared broken about two years ago, we mentioned that Russia’s macroeconomic policy had to change. On the budgetary side, it had to evolve toward more spending rather than saving in the National Wealth Fund – with reasonable constraints for the deficit. Implying that if revenues exceed the target, the government should spend any additional cash in the same calendar year. It looks as though the government followed this approach in 2023. Initially, the budget assumed revenues to exceed R26.1 trln while expenditures to be below R29.1 trln and the deficit of R 2.9 trln (the difference is due to rounding errors), i.e., 2.0% of GDP. The government planned to raise R8.9 trln in oil-and-gas taxes and R17.2 trln from the rest of the economy. In 2023, the oil-and-gas taxes slightly exceeded R8.8 trln, while all other revenues reached R20.3 trln. It means that the share of oil-and-gas taxes remained at a moderate 30.3% of total revenues (the initial budget assumed the figure to be 34.2%). Note that about 40% of total federal budget revenues came from VAT (including domestically produced and imported goods). Having raised an additional over R3.0 trln from the non-oil-and-gas taxes the government increased spending last year to R32.4 trln. It means that the federal budget deficit was only slightly wider (R3.2 trln) than planned initially. As a percentage of GDP, the deficit reached 1.9% as the government estimated. Overall, budgetary s...