Federal budget surplus is estimated at RUB 389.4bn (USD 12.5bn) or 0.9% of GDP in Jan-Aug, according to flash estimates by FinMin. In H1, revised federal budget deficit was estimated at RUB 367.9bn or 1.2% of GDP. In August alone, federal budget surplus was at RUB 102bn or 1.8% of GDP.

To compare, in Jan-Aug 2012 federal budget surplus amounted to RUB 529.4bn. In 2012 federal budget was closed with RUB 12.8bn deficit of 0.02% of GDP.

In Jan-Aug 2013 federal budget revenues stood at RUB 8.42tn (65.4% of target for 2013). Budget spending was RUB 8.03tn (59.7% of target for 2013). It must be noted that budget spending usually soars abruptly in the fourth quarter of the year. In 2013, the federal budget deficit is targeted at 0.8% of GDP.

In the meantime, last week, the government discussed the budget consolidation measures for 2014. This followed EconMin’s cutting the GDP growth outlook for 2013 from 2.4% to 1.8% and for 2014 to 3% from 3.7%. The spending is going to be cut by 5%-10% in 2014-2016 as estimated by EconMin Alexei Ulyukaev and PM Dmitry Medvedev.

The FinMin also raised the federal budget deficit target from previous 0.4%, 0.6% and 0.6% of GDP in 2014-2016, respectively, to 0.6%, 1%, and 0.6%. FinMin Anton Siluanov commented that increased deficits will not be financed from the National Welfare Funds. Higher domestic borrowing and privatisation revenues are supposed to cover the deficits.

Prior to the FinMin has proposed to follow the same course and increase social spending in order to fulfill Vladimir Putin’s post-election promises, despite the slowdown of the economy and the worsening of macroeconomic forecast. In order to increase the funding of “Putin’s promises” in the absence of addition revenues, the FinMin offered to cut other expenses by at least 5%-evenly through all departments.