The federal budget deficit is near zero in 11M24 but will soar in December

RUSSIA ECONOMICS - In Brief 09 Dec 2024 by Evgeny Gavrilenkov

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The Finance Ministry reported that in 11M24, federal budget revenues reached nearly R32.7 and moved steadily toward the annual target of R36.1 trln last month. In November alone, they attained almost R3.5 trln. Both the oil-and-gas (O&G) and the non-O&G revenues exceeded the 11M23 level by about 26% y-o-y. A naturally weakened ruble and high inflation helped to inflate them. As year-end tax settlements inflate revenues in December, and revenues are usually higher than in the previous months, it is very likely that in 2024 as a whole, federal budget revenues will visibly exceed the target. We believe they will exceed R36.7 trln. In November, federal budget expenditures were more or less on par with those in previous months and slightly exceeded R33.0 trln in 11M24. Hence, the budget deficit was almost non-existent (the Ministry of Finance estimated it at 0.2% of GDP – even though monthly GDP statistics don’t exist officially). We mentioned in the previous notes that the government recently amended the 2024 federal budget expenditures, having raised them to R39.4 trln, implying that in December, the economy will enjoy a quite generous R6.4 trln gift. The side effect will be high inflation this month and in January 2025, as the bulk of liquidity will come to the system in the very last days of December. As a result, the December federal budget deficit and the deficit 2024 as a whole will be almost the same. The government targeted the deficit to be R3.3 trln. We believe it will be slightly lower (R2.7 trln). In any case, relative to GDP, which may be about R200 trln this year, neither figure looks scary. It looks as though the next year will be another year of fiscal unce...