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.