WOOD Flash – Russia macro: Ministry of Finance introduces 2021-23 budget draft
Yesterday (16 September), the Russian government approved the 2021-23 federal budget draft presented by the Ministry of Finance. According to the data released so far, the updated budget deficit estimate for 2020E sees the deficit widening to 4.4% of GDP but, over the coming years, it is projected to decline gradually towards -1.0% in 2022E and -1.1% in 2023E. The most interesting data released so far are the expected levels of revenues and expenditures in the coming three years. Despite the recovery, the Ministry of Finance does not expect revenues to return to the pre-COVID-19 plans in the coming years, something that will happen only after 2023E. Expenditures will, nonetheless, remain high in 2021E, and are expected to decline towards the pre-COVID-19 estimates – RUB 117bn – only in 2022E in absolute terms, remaining higher relative to GDP. This illustrates the efforts of the government to keep fiscal prudence over the planning horizon (even though slightly below what we expected previously), while keeping a supportive level of expenditures, unlocked by increased borrowing and additional revenue streams, such as the recently proposed tax hikes, not only for high earners, but also for tobacco, mining and oil companies. Below, we answer the most common questions on the Russian budget policy for this year and the data presented so far in the budget draft.
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