Russia: Strong budget surplus means less borrowing - ING

Dmitry Dolgin, Chief Economist at ING, notes that the Russian Finance Ministry reported a strong RUB2.5 trillion (3.5% of GDP) federal budget surplus for the first nine months of 2018, overshooting both the RUB2.2 trillion consensus and our RUB2.3 trillion forecast.

Key Quotes

“The outperformance was caused, not so much by the high oil price, but rather thanks to 15% YoY growth in non-oil revenue (vs. the annual plan of 10% YoY), which is a result of more efficient collection procedures, as well as tightly controlled 2% YoY expenditure growth, at the lower range of the annual 2-5% growth guidance.”

“The current trend suggests that the full-year surplus may remain at RUB2.5 trillion, exceeding the RUB2.0 trillion implied by the most recent revision in the macro assumptions incorporated into the official budget draft.”

“As this is caused by an improvement in the non-oil balance, it also justifies the recent Finance Ministry's decision to cut the 2018 net local debt placement programme by RUB480 billion (including RUB380 billion open market placements) to RUB560 billion. With RUB360 billion net placement year-to-date, another RUB200 bn need to be placed in 4Q18.”