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Post: Adaptation complete: Russia gets windfall revenue


House of Government of the Russian Federation. Archive photo

Russia had a budget surplus in August

MOSCOW, September 14 – RIA Novosti, Elena Savelyeva. The Russian budget returned to a surplus of $230 billion in August, and about $450 billion according to Western analysts. What is the reason for this and are there hopes of reducing the deficit faster, RIA Novosti material said? .

“Sanction hole”

The budget was heavily affected by sanctions. It took time to redirect export flows from Europe to Asian markets. As a result, oil and gas revenues fell. According to the Ministry of Finance, for the eight months of 2023 – an increase of 38.2% to 4.8 trillion rubles.

In the January-August period, the budget deficit reached 2.36 trillion rubles, or 1.5% of GDP. However, it turned out that the difference between the expenditure and income parts was smaller than expected.

As Deputy Prime Minister Mikhail Mishustin said in August, the surplus reached 230 billion rubles. Growth in oil and gas revenues has helped a lot. By the end of last summer month they exceeded 1.8 trillion rubles; This is 56.5% more than last year.

Bloomberg estimates the real figure is twice that: about $450 billion.

Head of the Government of Russia Mikhail Mishustin - RIA Novosti, 1920, 09/08/2023

Mishustin evaluated the increase in oil and natural gas revenues of the Russian budget

Where does the money come from?

The noticeable increase in tax revenues from other sectors helped significantly, which offset the decline in the oil industry.

Non-oil and gas revenues (NOGD) increased by 24.2% in the first eight months of the year to 12.155 trillion rubles. Last month, it reached 1.82 trillion rubles, with a record annual increase of 57.5%. According to analysts, these made the main contribution to the budget change.

“Total revenue in August amounted to 2.5 trillion rubles, of which 74% came from NNGD. By comparison, for the commodity economy this figure is quite high: in 2022 it was below 60%. The lion’s share is made up of added value. “The tax, income tax brings another ten percent,” says Capital Lab partner Evgeniy Shatov.

Another factor is the decrease in public expenditures. They dropped 4.2% in August but started saving in June. In the last three months, government spending fell 5.2% compared to 2021 and rose only 13.2%; Total inflation was 21%. The analyst states that it is clear that the Ministry of Finance has chosen the path of strict consolidation to protect the budget.

The rapid restoration of balance in world markets and the increase in demand for Russian oil in Asia and Africa also benefited them. The Brent price rose to almost $90 per barrel, and the Russian Urals discount to standard grade decreased. Today it costs an average of $74 per barrel; This is a comfortable level for the budget.

Fair Russia - Chairman of the group For Truth - RIA Novosti, 1920, 31.08.2023

Mironov proposed reducing VAT for manufacturing enterprises

Economic adaptation

The adaptation of the Russian economy to external constraints played a role; This process is progressing faster than expected. Business activity in the country is recovering more intensively and domestic demand is increasing. Real dynamics were positive, especially with the impact of economic growth in sectors such as manufacturing, construction, wholesale and retail trade.

The value of GM Global Services Russia PMI Index in August was 57.8 percent compared to 53.9 in July. In the services sector of S&P Global (S&P Global’s Global Russia Services PMI), this figure increased from 54 to 57.6 in the same period. He went above the 50-point threshold for the seventh consecutive month.

Strong customer demand triggered a sharp increase in business activity. After the decrease in July, the index increased by 3.9 points in August. This is the highest value since January 2022, according to GlobalMedia.

“After the departure of major brands, the domestic light industry gained a new impetus for development. Manufacturers of detergents and cosmetics, clothing, food and animal feed increased their performance compared to last year. In July, the production volume of fish processing increased by 1.86 times,” says the State University of Management professor Galina Sorokina.

Electronic representation of an exchange office - RIA Novosti, 1920, 13.09.2023

The official dollar exchange rate on Thursday was 95.98 rubles

Weakening of the ruble

Finally, the depreciation of the national currency as expected contributed to the budget. It weakened by 5 percent in August, briefly trading above 101 rubles per dollar.

“Sanctions severely limited the export of energy resources, which forced the country’s leadership to resort to additional expenses (subsidies to oil and oil refining companies). Under these conditions, a noticeable weakening of the national currency ensured precisely the “erosion” of income. Financial on the Finmir market “in peacetime” the country receives income from oil exports and gas,” explains analyst Alexander Solovyov.

In his opinion, the actions of the Central Bank indicate that the weakening of the national currency has reached its peak.

“An excessively weak ruble leads to an increase in inflation, which is in direct contradiction with the policy of the Bank of Russia, which aims to target inflation at around four percent. Since the exchange rate is volatile and the main monetary policy instrument in this case is key. Considering this rate, we can say that the weakening of the ruble is over.” “We can. As the Central Bank showed at its extraordinary meeting in August, it increased this figure to 12 percent,” he said.

Head of the Government of Russia Mikhail Mishustin - RIA Novosti, 1920, 09/08/2023

Mishustin evaluated Russia’s budget deficit at the end of 2023

Reducing the current account deficit

According to the Ministry of Finance’s forecast, this year’s budget deficit will amount to two percent of GDP (about three trillion rubles). They plan to cover this mainly by borrowing from the domestic market. As experts emphasize, public debt in this regard will be low – about 15% of GDP.

At the same time, the budget deficit is expected to gradually decrease to 0.7 percent of GDP in 2025.

Analysts do not rule out the possibility that the rate of decline will be higher. Energy prices have increased on world markets and so far there are no macroeconomic reasons for the decline. Additionally, the impact of the new harvest will soon be noticeable in many non-resource sectors.

Doctor of Economic Sciences Alexander Neverov points out that the deficit is very small even at the planned maximum values ​​by world standards. Therefore, the government will most likely increase expenses proportionally in parallel with the increase in revenues. The economist emphasizes that this will now allow us to launch additional investment and social projects. This is strategically more important than reducing the budget deficit.

Source: Ria

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