Strong fiscal performance in October, lower deficit expected in 2020

RUSSIA ECONOMICS - In Brief 12 Nov 2020 by Alexander Kudrin

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The Ministry of Finance announced that the federal budget deficit in October was low and reached just R143.5 bn, which brought the 10m20 tally to R1800.4bn. Meanwhile, expenditures in October reached R2071.7bn, and in 10m20 they reached R16.945 trln.Revenue flow in October was relatively strong both from the oil-and-gas sector and from the rest of the economy. The former reached R474.5bn (down by 29% y-o-y), while the latter exceeded R1463.6 bn and was up by around 50% y-o-y. This relatively high number could have largely resulted from the fact that in the previous months some businesses got a kind of tax holiday and some tax payments have been delayed.In 10m20 the government collected R15.145 trln of revenues in the federal budget, of which R4,329 trln came as oil-and-gas revenues, while R10.816 trln came from the rest of the economy. Therefore, the share of the oil-and-gas revenues fell to 28.6% of total revenues, which was the ever-lowest level. By year-end, this share may be even lower.Note, that the amended ("pandemic hit") revenue plan assumed that the government would collect R17. 852 trln in total revenues, while the pre-pandemic plan counted on R20.594 trln revenue. The October revenue flow looked very strong, and it can be estimated total federal budget revenues this year could exceed R19 trln, implying a reduced budget deficit compared to the amended spending plan. The latter assumed spending of nearly R22.6 trln this year (while the pre-pandemic budget spending plan stood at R19.7 trln).The budget deficit may be lower than the amended budget suggested, also because it will be uneasy to spend over R5.6 trln in November-December. Some part of this spending ma...