BOFIT Viikkokatsaus / BOFIT Weekly Review 2020/37

At the end of August, the National Welfare Fund (NWF), which has been built up from taxing the energy sector, reached $180 billion, or 11.7 % of forecasted 2020 GDP. The NWF has increased by about 45 % this year in dollar terms. The tax revenues set aside from oil and gas earnings last year were transferred to the fund in March (BOFIT Weekly 2020/13). In addition, appreciation of the euro against the US dollar has helped increased the value of the NWF in dollars. Smaller amounts have been withdrawn from the NWF this year to cover budget shortfalls caused by the Russian government’s fiscal deficit. The value of assets in the NWF last surpassed such heights in late 2008 and first half of 2009, when the value peaked at $225 billion.

Slightly over $119 billion of the NWF are invested in highly liquid bonds of countries with high credit ratings. The remainder is invested in such forms as deposits in Russia’s state development bank VEB ($7.8 billion) or other Russian entities designated by the government. Majority stake in Sberbank that was bought from the Central Bank of Russia ($34.9 billion) represents the largest single investment (BOFIT Weekly 2020/17). These assets are part of the national investment strategy of enhancing the long-term growth prospects of the Russian economy.

The CBR’s foreign currency and gold reserves have also surged this year, even if they have been growing since early 2017. The value of the forex and gold reserves briefly topped $600 billion last month, and stood at $594 billion as of end-August. The previous peak was in August 2008, when the value of the forex and gold reserves reached $598 billion. The growth in reserves was boosted, among other things, by higher gold prices. Gold made up 24 % of CBR reserves at the end of August. Russia has the world’s fourth largest foreign currency and gold reserves after China ($3.308 trillion at end-August), Japan ($1.399 trillion) and Switzerland ($1.014 trillion).

The National Welfare Fund has seen large gains this year


Sources: Russian Ministry of Finance, Macrobond and BOFIT.

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