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Federal budget


In September, the monthly federal budget printed a surplus of 2.4% of GDP (vs. a surplus of 2.7% in August), according to the Ministry of Finance. The YTD budget surplus widened slightly to 1.2% of GDP, as the YoY growth in revenues and expenditures improved to 14.8% and 11.6%, respectively. The growth in revenues was spurred by a rebound in non-oil and gas items and a strong increase in oil and gas revenues (the highest since May 2012).

MinFin’s outstanding deposits in banks added RUB 211bn last month. The overall balance of MinFin’s accounts with the CBR increased RUB 327bn, partly due to FX revaluation (RUB 90bn).

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

In September, the YoY growth in budget expenditures quickened to 11.6%, bringing the 9mo13 growth to 3.0%. Given the planned volume of spending, we are likely to see rather supportive growth of 6-8% in 4Q13 vs. almost zero in 1H13 (note that planned amendments to the budget law 2013 do not affect expenditure volumes, only revenues).

The double-digit jump in non-oil and gas revenues was a one-off, owing to the positive calendar factor and favourable base effect, while the fundamental picture remained the same: the moderating economy putting a drag on profit and income taxes as well as VAT.

MinFin increased the outstanding amount of its deposits in banks to RUB 840bn as of early October, a 22-month high. Also, this offset the negative effect on liquidity of other federal government operations such as the monthly budget surplus and a negative monthly balance of domestic borrowing.

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. The possibility of tapping the Reserve Fund could also be considered subject to local borrowing and the success of privatisation.

Vladimir Kolychev, Daria Isakova
VTB Capital analyst

GDP, ruble, CBR, FX market

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