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Federal budget – weaker RUB boosts surplus to 0.7% of GDP in 1Q14


In March, the federal budget printed an almost zero balance – just 0.1% of GDP, or RUB 3.1bn – bringing the 1Q14 balance to a moderate surplus of 0.7% of GDP, according to MinFin. Monthly revenues and expenditures were at RUB 1.2tn (+2.5% YoY) and RUB 1.1tn (+12.9% YoY), respectively. February’s deficit was revised to 8.3% of GDP (from 9.6% of GDP previously).

Non-oil and gas revenues dropped 6.4% YoY to RUB 559bn, while annual gain in oil and gas revenues slowed to 12.4% and came in at RUB 593bn. Meanwhile, last month, MinFin’s outstanding deposits at banks was up RUB 85bn to RUB 405bn, while the balance of its accounts with the CBR decreased RUB 122bn.

Though January-February data on federal budget execution was distorted by some administrative issues, March brought a clearer picture that coincides with our understanding. Thus, non oil and gas revenues posted a decline that is logical under the meagre economic juncture. This, however, underpins our guestimate that over the first months of 2014, the annual advance in VAT was mostly due to the favourable base effect. Also, during 1Q14, the growth pace in expenditures was slightly higher than planned for the full-year: 8.7% YoY vs. 4.7% YoY, which might imply a more contractionary effect of fiscal policy over the reminder of the year, given no amendments to the ‘budget rule’ (even though debates on easing the rule have resumed recently, any changes are unlikely, at least for this year’s budget). Component-wise, expenditures seem to have gained greatly on defence outlays, which spiked 47.9% YoY in 1Q14 despite significant shrinkages across such expenditure lines as education (-24.3% YoY), healthcare (-20.1% YoY) and sport (-44.4% YoY).

On the liquidity front, MinFin’s combined operations remained positive last month (similarly to the on average 2mo14 impact), as it continued to build up deposits in the banking system and net domestic borrowings were negative last month.

Vladimir Kolychev, Daria Isakova
VTB Capital analyst


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