Budget 2023 closed with deficit of 1.9% of GDP

The “adaptation” budget for 2023 was closed with a deficit of 1.9% of GDP, or 3.2 trillion rubles, the Ministry of Finance summed up the preliminary results of the implementation of the main financial plan on January 11. This is almost the same as it was in the “shock” year of 2022 (2.1%), and fits into the plan of 2% of GDP initially adopted by the authorities. Such stability looks unusual given the fact that income and expenses within the year showed considerable volatility and in the final form were very different from those approved by the law on the budget for 2023 – total revenues, with a strong decline in oil and gas fees, eventually exceeded the planned figures by 3 trillion, expenses — by 3.3 trillion rubles. In general, the execution of the 2023 budget turned out to be very uneven: for seven months of the year there was a monthly surplus, and for five months there was a deficit.

The 2023 budget year began dramatically for an external observer: already in the first two months, the deficit reached almost 2.6 trillion rubles, which was about 90% of the plan for the year. Although the Ministry of Finance then explained such a frightening lag in income from expenses by the prompt conclusion of contracts and advanced advances, the forecasts of many analysts at that time acquired a panicky nature – they expected the final size of the “hole” in the budget to reach 5 trillion rubles.

But in fact, the deficit for 2023 fell within the planned 2% and amounted to 1.9% of GDP, or 3.241 trillion rubles.

As the Central Bank explained at the end of the year, the budget deficit was mainly (by 2.9 trillion rubles) financed from the savings of the National Welfare Fund (this does not take into account the budget rule, according to which the Ministry of Finance sold yuan and gold from reserves at a certain period of the year) . Separately, in December, with its traditionally high year-end spending, a deficit was recorded (as well as in January, February, April and July), the remaining seven months ended up with a surplus.

Let us note that until recently it was expected that the result of budget execution in 2023 would be even more positive. At the end of December, Russian Finance Minister Anton Siluanov spoke about expecting a deficit of “about 1.5%,” stipulating, however, that the final estimate will depend on “what volume of GDP we will receive after all the clarifications and recalculations” ( Let us recall that Rosstat recently clarified the estimate of the decline in GDP in 2022 to 1.2% from 2.1% and increased the estimate of GDP growth in 2021 to 5.9% from 5.6%, see “Kommersant” for January 9).

It is interesting that with an almost exact coincidence of the planned and actual deficit indicators, the revenue and expenditure parts have changed quite significantly in comparison with the budget law adopted in December 2022.

And such a change in the basic parameters, we note, again did not require amendments to the budget law. As in 2022, with its macroeconomic and geopolitical storms of the first year of the military operation, the 2023 budget, unlike previous years, was never revised by the State Duma – only forecast estimates of income and the current budget breakdown of expenses changed. This freedom of maneuver was given to the White House by the broad budgetary powers previously granted to it, allowing it to manage practically without the participation of parliament during the current execution of the state treasury.

As a result, revenues for 2023 amounted to 29.123 trillion rubles, which is a plus of 4.7% to the 2022 result. Compared to the plan established by the budget law, the growth in revenues was immediately 11.5%, or 2.993 trillion rubles. With such growth within the revenue side, the situation was heterogeneous. The entire increase was obtained thanks to non-oil and gas revenues, which totaled 20.301 trillion rubles over the year, or plus 25% compared to last year. The growth was primarily ensured by the largest Russian tax in terms of volume – VAT, whose collections from the restoration of business activity in previous months provided more than half of all non-oil and gas revenues received – this is 11.614 trillion rubles. (we are talking about all VAT receipts – “domestic” and “imported”). The final growth rate in collections of this tax by 2022 is plus 21.6%. Income tax also increased significantly (especially in the second half of the year) – by 14.9%, to RUB 1.919 trillion.

With regard to the second component of the revenue side—oil and gas revenues—the situation throughout the year was noticeably worse. At the end of 2023, revenues from the production and sale of oil and gas amounted to 8.822 trillion rubles. This is 10% more than the base level – 8 trillion rubles, broken down by month, the minimum required for the budget to cover expenses (next year, let us remind you, instead of this “cut-off amount”, the “cut-off price” approximately corresponding to it is returned – $60 per barrel).

However, exceeding the “base” is generally expected; since 2018, there have been no additional oil and gas revenues, only in the pandemic year of 2020.

More importantly, oil and gas revenues in 2023 were 23.9% less than in 2022.

The Ministry of Finance explains this significant reduction by “a high comparison base for the previous year, a decrease in prices for Urals oil at the beginning of the year, a decrease in prices and a reduction in natural gas export volumes.”

Let us explain that the average annual price of a barrel of Urals oil in 2023 was $62.99 per barrel – this is higher than the ceiling of $60 set (but actually did not work) for Russian oil, but noticeably lower than the $70 level envisaged during the 2023 budget. .1 per barrel. Compared to 2022 ($76.09), the price of Urals decreased by $13.1, or 17%; it was also below the level of 2021 (then Russian oil cost an average of $69 per barrel), but at the same time exceeded the 2020 average year at $41.73 per barrel (see “Today’s date” for January 10).

It should be noted that throughout 2023, as world oil prices rose, the gap in oil and gas revenues, which at first seemed catastrophic, progressively decreased (at the end of the six months it was 47%, for three quarters – 34.5%, for the whole year – 23.9%).

Since the Ministry of Finance did not receive enough oil and gas revenues in December alone, on Thursday, January 11, it announced not the purchase, as before, but the sale of currency and gold from the reserves of the National Welfare Fund. Let us remind you that according to the budget rule, if there is a shortfall in basic income, the Ministry of Finance must sell currency, and if there is an excess, buy it on the market.

According to the department, 69.1 billion rubles will be allocated for such operations from January 15 to February 6. (4.1 billion rubles daily).

In December, the Ministry of Finance, on the contrary, allocated funds for the purchase of foreign currency (11.7 billion rubles per day), but these operations did not actually affect the foreign exchange market, since they took place between the Central Bank and the Ministry of Finance.

The expenditure portion of the federal budget in 2023 amounted to 32.364 trillion rubles. This is 11%, or 3.3 trillion rubles, higher than the plan established by the budget law, and 4% higher than the level of 2022, in which expenses increased unprecedentedly by almost a third of the plan. However, in conditions of inflation of approximately 7.5% (Rosstat will give the final figure for 2023 on January 12), an increase in budget spending by 4% means a decrease in real terms.

Let us remind you that the Ministry of Finance has not disclosed the structure of expenses (including military ones) for their current implementation since May 2022, citing the desire to reduce the risks of introducing new sanctions. In general, the distinctive feature of 2023 in terms of expenses was their abnormally high growth at the beginning of the year, which the Ministry of Finance explained by generous advances and advanced government procurement. This growth, however, dried up quite quickly: according to the results of the first quarter, expenses were higher than last year by 34%, half of the year – by 19.5%, three quarters – by 9.7%, four (as it became known on January 11, from annual figures) – by 4%.

Vadim Visloguzov