BOFIT Viikkokatsaus / BOFIT Weekly 2018/48

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.