Robust increase in Russian government revenues, substantial budget surpluses

Revenues to the consolidated budget (federal, regional and local budgets, plus government social funds) in the first nine months of this year were up 20 % from the same period in 2017. Oil & gas tax revenues were up by nearly 50 %, and rose even faster in the third quarter on quite high oil prices.

Other revenue streams to the consolidated budget rose by 13 % y-o-y in January-September. While value-added taxes and corporate profit taxes boosted budget revenues remarkably, revenue streams from mandatory social taxes of employers and labour income taxes were up well over 10 %.

Budget expenditures, in contrast, have only risen modestly, up by just 6 % y-o-y in January-September. Healthcare spending topped the increase, rising by nearly 20 %, followed by education at more than 10 %. The increases mainly reflect substantial hikes in wages in these sectors. Spending on administration turned to hefty increase, while spending on domestic security was up by a few per cent. Growth in defence spending strengthened to over 7 %. Budget categories this year seeing increases of only about 1 % (i.e. real declines) include the economy’s various sectors, and pensions and other forms of social support.

The rapid growth in revenues has turned Russia’s government finances to surpluses. The 12-month surplus of the consolidated budget exceeded 1.5 % of GDP in September. The finance ministry expects the federal budget surplus to end up at about this level for the whole of this year even if the newly-approved supplemental budget spending (rather small) for this year will materialize and the large remaining amounts of last year’s budget funds will all be used.