The Ministry of Finance has published draft amendments to the 2014 budget law. The key takeaways are as follows.
A favourable mix of higher than expected oil prices and a weaker RUB is to boost oil and gas tax inflows by almost RUB 1.04tn.
Slower growth, weaker imports and one-offs are to shave some RUB 0.3tn off the non-oil & gas revenue base.
There are no material changes to the spending plan, in line with the Budget Rule.
The resulting budget balance is RUB 750bn higher than the initial plan (0.5% of GDP surplus vs. a 0.5% deficit), which is enough to i) compensate for the shortfall in privatisation and borrowings proceeds (RUB 650bn) and ii) provide an additional RUB 100bn in inter-government loans to the regional budgets.
Our own forecasts are slightly more on the conservative side as we expect the budget to be balanced (rather than in surplus) due to the sharper economic slowdown and consequently poorer tax collection. That said, the draft amendments generally confirm our assessment that MinFin is unlikely to have any extra funds to spend, or save in the Reserve Fund for that matter. If anything, we see downside risks to MinFin’s revenue projections and hence planned transfer to the Reserve Fund (RUB 300bn).
For these reasons, and in light of our assessment that the 2015-16 revenue (and, hence, spending) projections look too upbeat, we believe that fiscal stimulus via higher spending and consequent changes to the Budget Rule are unlikely. In our view, the room for stimulus is limited to quasi-fiscal measures, such as more infrastructure spending from NWF or more funding for government-sponsored investment projects from state development bank (VEB). These, however, are unlikely to ramp up before late 2014 at the earliest.