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Federal budget – small 1.0% of GDP deficit in November


In November, the monthly federal budget printed a deficit of 1.0% of GDP (vs. a monthly surplus of around 0.1% in October, revised upwards from a deficit of 0.7% of GDP), according to the Ministry of Finance. The YTD budget surplus narrowed to just 1.0% of GDP, on a further acceleration in the annual growth of expenditures to 22%, and flat annual growth in revenues of around 6.9%. The growth in revenues moderated mainly on a slowdown in oil and gas items, while non-oil and gas revenues were fairly strong.

MinFin’s outstanding deposits in banks shrank RUB 315bn last month.

On a separate note, First Deputy Minister of Finance Tatyana Nesterenko said that December revenues and expenditures were planned at RUB 2,151.7bn and RUB 1,173.8bn, respectively.

It could be argued that a 22% YoY increase in budgetary expenditures heralds good news for the economy, but a deeper look reveals that to a large extent the acceleration last month (+10.8pp) was due to a pick-up in spending on national defence. This spending line is highly volatile and we tend to think that MinFin simply brought forward some of the year-end expenditures in an effort to smooth seasonality. Indeed, given the recent comments from MinFin, this December’s monthly budget expenditures are to represent 16% of the planned FY13 amount, while over 2010-12 it was 18%. This implies only a moderate 4.8% annual increase in budget spending during 4Q13 (i.e. stagnant/negative in real terms), suggesting that the federal budget remains in consolidation mode, and its impact on growth is still contractionary.

The combined effect of federal government operations on liquidity was significantly negative in November, mainly due to the drain of funds placed on banks’ deposits and a positive monthly balance of domestic borrowing, albeit with heavy budget spending.
Vladimir Kolychev, Daria Isakova
VTB Capital analyst

GDR, Russia

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