Yesterday, Prime Minister Vladimir Putin stated that budget spending in 2012 was to be increased RUB 108bn due to additional budget revenues. Particularly, RUB 24.3bn is aimed at housing for veterans, RUB 14.7bn at higher military salaries and RUB2.5 at the Funds of Fundamental Research.
This revision supports our view that a revision of oil forecast to USD 115/bbl would reduce the budget deficit rather than trigger a significant upward revision to budget expenditures. We are reiterating our end-year budget deficit forecast at 1.5% of GDP, assuming a USD 100/bbl oil price. If oil averages at MinEconomy's assumption of USD 115/bbl, then the budget is likely to be in a small surplus this year.