The Russian budget remains in decent shape

RUSSIA ECONOMICS - In Brief 11 Jun 2024 by Evgeny Gavrilenkov

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The Ministry of Finance reported that in 5M24, total revenues of the federal budget reached R14.3 trln, i.e., a 45.5% y-o-y increase. Oil and gas (O&G) revenues grew by 73.5%, while non-O&G revenues climbed by 34.1%. The former revenue constituency of the budget is quite volatile, and it will likely stop that fast in the rest of the year. Trends in the latter constituency indicated that the economy appears not in too bad shape, as in 5M24, the government collected 38.8% of the annual non-O&G revenue plan. Note that, usually, monthly revenues increase close to the end of each year. In 5M24, total revenues of the federal budget reached 40.7% of the annual plan (the percentage for the O&G revenues was higher – 45.1% of the plan). The amendment assumed a moderate increase of the budget deficit, namely, to R2.1 trln, and this figure as a percentage of GDP doesn’t look scary as GDP may climb close to R190 trln amid elevated inflation and decent real growth. In such a situation, the government couldn’t avoid the temptation to amend the budget, but the amendments were marginal. The revenue side remained almost unchanged while the revenue target was raised by a mere R0.522 trln (to about R37.2 trln). In 5M24, the government financed 41.1% of the yearly planned expenditure. The amended expenditures imply a 14.9% increase relative to the previous year. According to the government's thinking, revenues will increase this year by 20.3%, which doesn’t appear unreasonable. All in all, the government tries to maintain macroeconomic stability, even though budgetary revenues that keep flowing in excess of initial expectations encourage the authorities to inflate expenditures, albeit mode...