Yesterday, the Ministry of Finance published the draft 2013-15 budget on its website. The document is to be submitted to the State Duma by 1 October.
MinFin cut its 2013 budget deficit forecast to 0.8% of GDP (from 1.5% in the May draft). The revenues forecast was increased a slight 0.5pp to 19.3% of GDP, while expenditures expectations were lowered 0.2pp to 20.1% of GDP. Revenues and expenditures are set to see moderate YoY increases of 1.5% and 5.0%, respectively, in 2013.
The breakdown shows that the combined share of the state, defence and security in total expenditures declined to around 30% (in 2013-15 on average) from the 40% planned previously. Meanwhile, the share of federal budget outlays on pensions increased 10pp from the May draft to around 26%.
Besides, along with projections of annual placement of USD 7bn Eurobonds with a 30-year tenor over the next three years, MinFin plans to place RUB 449bn in local currency bonds next year, RUB 399bn in 2014 and RUB 306bn in 2015.
The draft shows that MinFin is following a prudent approach towards the complete implementation of ‘budget rule’ from 2015. This is illustrated by the fact that the increased estimate of revenues (as a percentage of GDP) is not accompanied by hiked expenditures, opting instead to contain the budget deficit.
Fiscal prudency is also reflected in the decreased share of military expenditures in favour of pensions spending, which is supportive given the stalled debate on pension reform. However, the budget will not cover the whole deficit of Pension Fund. As for the Urals assumptions in 2013-15, they have likely remained unchanged (at USD 97/bbl, USD 101/bbl and USD 104/bbl, respectively), according to recent comments by the Ministry for the Economy.
The moderate increase in fiscal expenditures is set to pose an additional drag on the growth of the economy next year. We are reiterating our 2013 GDP growth forecast at 2.0% YoY.