The federal budget posted deficit of RUB57bn in February, according to preliminary data published by the FinMin. This is worse than the surplus of RUB36bn in February last year, but the January surplus was revised upward to RUB367bn from RUB284bn, which offset the impact. As a result, the surplus is RUB310bn in Jan-Feb, an improvement over RUB227bn last year despite the lower oil prices.
The breakdown shows that revenues were up by 12.2% y/y in Jan-Feb, mainly on the back of non-oil revenues which were up by 18.5% y/y after the VAT hike. Oil revenues increased by 6% y/y despite the lower oil prices, which can be a result of changes to oil sector taxation. Spending growth has also picked up, however, and reached 9.8% y/y in the two months of the year after less than 2% in 2018. The biggest impact comes from social spending, up by 21.6% y/y, which explains close to 80% of the total spending increase. Spending on the environment was the other larger item, as it more than doubled in Jan-Feb y/y, but this is likely to reflect one-off events. The RUB310bn surplus, together with net domestic borrowing of RUB56bn and some use of fiscal reserves, was used for the RUB 460bn forex purchases carried out in Jan-Feb as part of the fiscal rule. External financing was negative at RUB 130bn, reflecting debt repayment in the absence of new borrowing.
Meeting the budget targets was very easy in the last years as budgets were based on a very conservative oil price forecast, but this year things are different. The budget for 2019 assumes a surplus of 1.9% of GDP at USD63.4 oil price and exchange rate of USD/RUB63.9.