Economist Nikolaev predicted a sad fate for indexation of pensions due to budget deficit

“Obviously unfavorable scenario”

This year, the monthly reports of the Ministry of Finance regarding the parameters of the budget deficit have turned into a kind of ritual horror stories, inevitable like a summer shutdown of hot water in residential buildings. And now, Anton Siluanov’s department has issued “interim” information, which gives a serious cause for concern: in January-April, the shortfall in the state treasury amounted to 3.4 trillion rubles, exceeding the amount planned for the whole year of 2.9 trillion.

At the same time, in April alone, the budget deficit increased immediately by 1 trillion rubles, that is, by almost a third. And four-month revenues (of $7.7 trillion) were 22% lower than revenues for the same period in 2022.

As for the proceeds from oil and gas exports, they have collapsed since the beginning of the year by 52.3%, to 2.2 trillion rubles. The Ministry of Finance attributed this to the high base of last year, the decline in prices for domestic grade Urals oil and the fall in natural gas sales. According to the ministry, the dynamics of commodity revenues is gradually entering a stable trajectory, which corresponds to their base level of 8 trillion rubles a year. The Ministry of Finance estimated expenses in January-April at 11.2 trillion rubles, they exceeded the figure for the same period in 2022 by 26%.

“The situation is really alarming,” says Artem Deev, head of the analytical department at Amarkets. – The Ministry of Finance expected a deficit of 2% of GDP this year, but we have already exceeded these calculations by 843 billion rubles. So far, it is compensated, according to the budget rule, at the expense of the National Welfare Fund.

The bad thing is that oil and gas revenues have seriously declined, although now, thanks to the government’s actions (in particular, to reduce discounts on hydrocarbons), their dynamics are leveling off and gradually reaching a plateau. Non-oil and gas revenues in January-April rose by 5%, which is quite good. And if in the remaining months until the end of the year the government manages to keep the treasury in surplus, there will be no special negative consequences for the economy.”

Leading expert of the Center for Political Technologies Nikita Maslennikov urges not to be afraid of the “intermediate” indicators of the first four months. Their nature is largely technical, recalls the interlocutor of “MK”: firstly, during this period, a considerable part of the costs of various government contracts and purchases was advanced; secondly, an advance payment was made to the Social Fund in the amount of almost 1.5 trillion rubles; thirdly, the Single Tax Account System has not yet reached its design capacity.

At the same time, the budget cannot be called risk-free, primarily due to the unstable situation with oil and gas revenues: exporters receive less of them, although the shortage is to some extent compensated by the lower exchange rate of the ruble – relative to what was drawn up for 2023 and the budget three-year period .

“So far, the working forecast regarding the parameters of the budget deficit in the amount of 2.4-2.5% of GDP remains in force,” says Maslennikov. “And even if the bar of 3% is exceeded, nothing terrible will happen, since such a deficit is compensated without much damage to the market. On the other hand, this will become an additional burden on the financial system, since the state will have to borrow in the domestic market at high interest rates, and banks, in turn, will sharply reduce corporate lending. Accordingly, the dynamics of overall economic growth in Russia will slow down.”

In addition, Maslennikov argues, there is a high risk of a drop in energy demand due to the slowdown in the global economy and the sluggish pace of China’s GDP recovery. It is also unclear how the story with a potential American default will end, and what the consequences will be for the world and Russia. As for the average oil price, the US Department of Energy has just lowered its forecast for the current year for Brent to $78 per barrel.

Events are developing according to a frankly unfavorable scenario for us, says Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences. It is very difficult to mitigate the consequences of a 45% collapse in oil and gas revenues in January-March.

This year, the budget deficit will be partially offset by the NWF and domestic borrowing, but the pace of its increase portends big problems in 2023. The state will not cut social articles, but we should not wait for the indexation of pensions and salaries, as well as one-time payments and other measures of social support.