The recent data implies that in January, the monthly balance of the federal budget reverted to a deficit for the first time since 1998. On the revenues front, a strong RUB was not beneficial for oil & gas revenues (average Urals stood at RUB 3,375/bbl in the first month of 2013), which nudged the budget balance into red.
The Ministry has followed its path of executing the budget more evenly, with higher expenditures during the first half and lower in the second. Hence, although at the beginning of this year fiscal spending looks modestly supportive for growth (however, 14% YoY growth in fiscal expenditures in January 2013 was significantly lower than the 57% YoY in January 2012), during 2H13 Russia’s economy is likely to face a negative impact from the much tighter fiscal policy.
Meanwhile, we note that MinFin might have sterilised around RUB 344bn of the RUB 1.2tn funds routed to the economy in January (which is mainly indicated in the increase of federal government’s financial resources owing to autonomous and budgetary enterprises as well as public companies).
Furthermore, the monthly budget deficit (coupled with the negative balance of net domestic borrowings of RUB 79bn) only eased the total heavily negative effect on liquidity of MinFin’s combined operations last month. The key drag on liquidity was a narrowing of MinFin’s deposits in the banking system.