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Federal budget prints a zero balance in 2012


According to the Minister of Finance, in 2012 the Russian federal budget printed a marginal deficit of 0.02% of GDP, or RUB 12.8bn. This is less than the original plan (as contained in the budget law for 2012-14, of 30 November 2011) of a deficit at 1.5% of GDP, and slightly higher than the 0.07% as stated in the amended law of 12 December 2012. However, it is close to our expectation of a slight surplus.

Budget revenues were 0.4% below the target (mainly thanks to the non-oil and gas part) and reached 21.0% of GDP (of which oil and gas revenues contributed half), while spending came in 0.6% lower than plan, at 21.0% of GDP. Also the non-oil budget deficit jumped 1.1pp to 10.6% of GDP. Meanwhile, in the last week of December, MinFin’s account in the CBR shrank RUB 1.3tn to RUB 6tn. 

Russian budget figures typically end up being better than expectations due to MinFin’s conservative planning. In 2012, higher oil prices were a major factor as well. Also, the bulk of the spending catch up came, as usual, in December, when spending increased more than 2.5 times to RUB 2.3tn (from RUB 0.9tn in November). This is usual. As a result, the monthly budget recorded the largest deficit in 2012: RUB 807bn in December vs. a RUB 70bn surplus in November. This pattern had a positive influence on financial sector liquidity: RUONIA slid 100bp during the last days of 2012 and the first days this year.

According to our base case scenario, which implies Urals at USD 93/bbl, we think the federal budget might delve further into a deficit this year (we see -1.2% of GDP). MinFin expects a 0.8% of GDP deficit with an average Urals oil price at USD 97/bbl and spending based on Urals at USD 91/bbl under the budget rule. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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