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Federal budget printed 1.9% of GDP surplus in August


In August, the monthly federal budget printed a surplus of 1.9% of GDP (vs. a deficit of 1.4% in July, revised upwards from 2.3%), according to the Ministry of Finance. The YTD budget surplus widened slightly to 0.9% of GDP. At the same time, the annual growth in revenues plunged into the negative area with a 1.7% drop in August, although there was an 11.1% YoY increase in oil and gas revenues. The annual growth in expenditures kept improving and reached 14.7%.

MinFin’s outstanding deposits in banks added RUB 31.5bn last month. The overall balance of MinFin’s accounts with the CBR increased RUB 138bn.

We highlight several key points in the report on the federal budget execution last month.

In August, the annual growth in budget expenditures accelerated to almost 15%, bringing the 8mo13 growth to 2.7% YoY. Given the planned volume of spending, we expect the growth in fiscal expenditures to be faster in 2H13 than in 1H13, at 7-8% YoY (on average) vs. almost zero.

The double-digit decline in non-oil and gas revenues is a strong reminder of the weakness in the economy. The discouraging outcome of the collection of non-oil and gas revenues is the main challenge for the key parameters in the budget for this and next year.

The combined effect of federal government operations on liquidity was visibly negative in August, on the monthly surplus of the federal budget (despite a YoY contraction in revenues), the smaller amount of MinFin funds placed on banks’ deposits and a moderately negative (RUB 36.1bn) monthly balance of domestic borrowing. Note that this seasonal autumn toughness in liquidity conditions will likely be smoothed by the 3m 312-P auction facility, launched last Friday.

Under our base case scenario, we expect the FY13 federal budget deficit at 0.5% of GDP and a minimum-to-zero transfer to the Reserve Fund.

Daria Isakova
VTB Capital analyst

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