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Main guidance for 2014-16 federal budget

According to Vedomosti, the Ministry of Finance has prepared the main guidance for the 2014-16 federal budget (not public yet). Due to a downwards revision in the key macro indicators for the coming years (in particular, the slower growth in nominal GDP), the growth in budget revenues and expenditures was also revised significantly down. Fulfilling Putin's strategic decrees remains a priority. The biggest additional projects to be financed by the budget are the Moscow-Kazan high speed railway, the federal target programme on the Russian Far East and the 2018 World Cup. MinFin is considering a budget manoeuvre to allocate expenditures in the most efficient way. The major part of this manoeuvre is a decrease in the transfer to the State Pension Fund.

The government is planning its budget for the next three years under tight conditions. In order to fulfil all obligations and still keep the budget deficit below 1% of GDP, the government needs to change the structure of expenditures. The planned cut in the transfer to the pension fund will become the main source for an increase in military and social spending, as well as a rise in the financing of some infrastructure projects.

More details are to follow when the document becomes public.

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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