The federal budget surplus is planned at 0.8% of the GDP in 2020, the FinMin press department said Thursday, correcting an earlier statement by Siluanov that it will be 0.5%. Apparently, the number comes from the revised draft budget for 2020, which the government should discuss on Sept 19 before it is submitted to parliament. The original draft projected surplus of RUB1,335bn or 1.2% of the GDP, but it was based on an earlier macroeconomic forecast. Still, the main assumptions have remained unchanged at USD57 (Urals oil price) and USD/RUB65.7. The budget for 2018 assumes surplus of 1.7% of the GDP. Note that the difference does not mean actual fiscal loosening because spending is limited under the fiscal rule. Rather, it means smaller accumulation of oil revenues in the National Wealth Fund.
Meanwhile, FinMin Siluanov confirmed plans to start investing money from the National Wealth fund in 2020 after the liquid part of the fund exceeds 7% of GDP. This will be similar to fiscal loosening, in our view, and it was criticized by the CBR as relaxation of the fiscal rule, which will make fiscal policy more pro-cyclical and require larger policy rate changes by the CBR. Potentially, the amounts to be invested can be large, depending on oil prices, but the FinMin has a proven record of fiscal conservatism and we doubt it will take full advantage of this option. On the other hand, using fiscal reserves is one of the easier ways to boost growth toward the targets set by President Putin, while deep structural reforms remain unlikely.