The federal budget posted deficit of RUB224bn in April, which reduced the YTD surplus to RUB181bn, according to preliminary figures published by the FinMin on Tuesday. The surplus for Q1 was also revised upward by RUB61bn, contributing to the overall result. The monthly result is slightly better than the deficit of RUB244bn registered in April last year, but it is disappointing considering the strong 29% y/y growth of revenues after a 38% y/y increase in oil revenues. Expenditures were up by 22.2% y/y in April, which is well above the growth rate for Q1 and seems to reflect mainly higher spending on defense and social policy.
In the four months of the year federal budget revenues are up by 16.2% y/y thanks to 26% expansion of oil revenues, although non-oil revenues were also strong rising by 9.1% y/y. Spending is under control, growing by just 1.3% y/y in Jan-Apr. Part of the good performance is the high base in 2017 due to the one-off payment to pensioners in January, which reduced budget spending on social policy by 16% y/y in Jan-Apr. Spending on the economy is the other item that registered decline, while most other sectors see significant increase in spending. In absolute terms the largest is defense, where additional RUB99bn was spent during the four months.
The FinMin has prepared a budget amendment, according to which the budget will post 0.4% of GDP surplus this year instead of the originally planned 1.3% deficit. We expect an even higher surplus given current oil prices and exchange rate, but the conservative forecast allows the FinMin to contain spending demands. According to the proposal spending will rise by only RUB62bn, but we are yet to see whether this draft will be amended by the new government in view of the latest initiatives to increase state spending for infrastructure, education and healthcare.