Russia heading for 2021 budget surplus, even with Putin spending goal -analysts

FILE PHOTO: An employee holds a sample of crude oil at the Irkutsk Oil Co-owned Yarakta field in the Irkutsk region
FILE PHOTO: An employee holds a sample of crude oil at the Yarakta oilfield, owned by Irkutsk Oil Co, in the Irkutsk region, Russia on March 11, 2019. REUTERS/Vasily Fedosenko/File Photo

July 13, 2021

By Alexander Marrow

MOSCOW (Reuters) – Russia is on course to run a budget surplus this year, analysts say, a turnaround after strong half-year data, with high oil prices giving room to cover spending promises from President Vladimir Putin ahead of parliamentary elections.

Last month, Putin promised to spend on infrastructure, education and health, seeking to give the ruling United Russia party a boost. The pledges added to social support measures announced in April that will cost the budget around 400 billion roubles ($5.40 billion) over two years.

Russia had a budget surplus of 626 billion roubles from January to June, the finance ministry said on Monday, with tax increases, the economic recovery and high prices for oil, Russia’s major export, all behind the boost in revenues.

“Such positive data is largely due to the Russian economy’s earlier than expected recovery and also high prices for oil,” said Bank St Petersburg analysts.

Unless significant anti-COVID-19 curbs are implemented, something Putin and other senior officials have repeatedly said they want to avoid, the budget will end the year in surplus, they added.

The finance ministry’s 2021 plan was for a budget deficit of almost 2.8 trillion roubles, around 2.4% of gross domestic product this year. Finance Minister Anton Siluanov last month said the deficit would likely stand at 1% of GDP.

Increased tax revenue has also helped. Russia is planning to hit metals firms with $2.3 billion in export taxes between August and December, one of a handful of tax increases since the coronavirus pandemic pushed Russia’s economy to a 3% decline last year.

“Clearly the tax burden has increased and will increase further,” said Sofya Donets, Russia and CIS economist at Renaissance Capital.

Renaissance Capital sees a budget surplus of 3% of GDP if oil prices remain near current levels of $75 a barrel. UralSib analysts forecast a surplus of 1.37 trillion roubles, or around 1.1% of GDP.

“Additional spending promised by… Putin… will increase budget spending in the second half of 2021. But we think that there will be a budget surplus at the end of the year if oil prices remain high,” Sberbank CIB said in a note.

($1 = 74.0900 roubles)

(Reporting by Alexander Marrow and Darya Korsunskaya; Editing by Katya Golubkova, William Maclean)