by 2024, the budget impulse in the macroregions of the Russian Federation will be positive

At the end of 2023, the budget impulse in all macro-regions of the Russian Federation will be positive, the Central Bank estimated in its July commentary on the regional economy. Let us explain, we are talking about a change in the balance of the budgets of the territories without taking into account transfers: when it is with a minus sign, that is, there is an expansion of the deficit, they speak of an increase in the budget impulse, while a decrease in the deficit indicates a decrease in the impulse.

According to the budget plans, the largest increase in momentum will be in the Central and North-Western macro-regions, and the smallest in the Volga region (see chart). “The magnitude of the budget impulse in Russia as a whole may be higher than in 2022 and closer to the level of 2020. This will support investment and consumer demand in the economy, positively influencing output and acting as a factor in the growth of prices for goods and services,” the regulator said in a review.

Analysts at the DIP Central Bank in the July issue of another report – “What the Trends Say” – also note that the growing lending activity is accelerating the growth in demand associated with government spending. “In the context of active spending of budget funds and growth in lending, as well as the exhaustion of the influence of factors that constrain price growth, including increased inventories and the savings rate of the population, inflationary risks are increasing,” the DIP states.

It should be noted that the new consensus forecast of macroeconomists, published yesterday by the Central Bank, is noticeably improved in terms of GDP growth in 2023, from 0.8% to 1.5%, but worsened in terms of inflation – from 5.5% to 5.7% . At the same time, in terms of the consolidated budget deficit, the forecast remained the same – 2.7% of GDP. “The consensus assumes a rather favorable macro picture: stronger economic growth with a weaker ruble, but with minimal inflationary effects, apparently related to the tightening of fiscal policy (negative fiscal impulse in the second half of 2023 and in 2024),” believes Dmitry Polevoy from “ Lokoinvest.

Analysts at Raiffeisenbank, in turn, note that the budget channel is now giving the main impetus to the economy, but the money comes into it with a shifted seasonality. Growth potential remains, but “the consequences of the introduction of the sanctions regime will continue to cool GDP,” analysts say.

Artem Chugunov