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Federal budget prints the highest surplus this year in August

According to MinFin, the federal budget surplus totalled RUB 529bn, or 1.4% of GDP, in 8mo12. The monthly budget surplus advanced to 4.7% of GDP (RUB 244bn) in August, the highest reading for this year, from virtually zero in the previous month (0.3% of GDP or RUB 14bn). Monthly revenues were up a strong 12.3% YoY (up 6.0% MoM), with oil revenues almost flat in annual terms (+0.3%) but down 3.5% MoM. At the same time, monthly expenditures dropped last month, both MoM (16.2%) and YoY (9.5%). MinFin’s outstanding deposits in banks amounted to RUB 348bn at the end of August, up from around RUB 18bn at the end of July. The balance of MinFin’s accounts with the CBR increased RUB 347bn in January-August 2012, partly due to FX revaluation (RUB 56bn).

In August, the federal budget surplus hit a record for this year on the back of a drop in fiscal expenditures. Given the planned volume for this year, MinFin is to spend RUB 4,921bn in September-December 2012, or average YoY growth of approximately 9% (vs. 32% YoY in 1H12). Were spending to be lower than planned (which has typically been the case in recent years) the growth rate in spending would be even lower. Thus, weak expenditures growth would effectively cool down the economy after the spending spike at the beginning of the year.

According to the CBR daily data on changes in the consolidated budget account, the overall effect of MinFin’s operations on liquidity was markedly positive in August (RUB 95bn). In our view, depositing budget resources in the banking system was the core supportive factor for liquidity conditions in August, despite the federal budget surplus shaving liquidity off significantly during the reported period. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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