Ministry sees Russia’s budget surplus at 1.8% of GDP in 2019
MOSCOW, Jul 9 (PRIME) -- Russia’s budget surplus will grow to 1.8% of gross domestic product (GDP) in 2019, shrink to 1% of GDP in 2020 and to 0.6% of GDP in 2021, as seen by PRIME in the Finance Ministry’s main directions of budget policy released on July 8.
Budget surplus will rise in line with taxation changes, including an increase of value-added tax to 20% from 18%, and a higher oil price than envisaged by the current budget, the ministry said.
Russia’s budget revenue will amount to 19.851 trillion rubles in 2019, to 20.026 trillion rubles in 2020, and to 20.549 trillion rubles in 2021, up from 17.073 trillion rubles in 2018. Budget spending will stand at 17.897 trillion rubles, 18.873 trillion rubles, and 19.890 trillion rubles, respectively, growing from 16.591 trillion rubles in 2018.
In 2019, the ministry plans to cut spending in several areas, including the defense industry, healthcare, culture, and national economy as compared with 2018, but will raise the spending in 2020 and in 2021, while spending on national security and law enforcement will grow each year.
The ministry also plans to raise domestic borrowing to 1.475 trillion rubles in 2019, 1.847 trillion rubles in 2020, and 1.657 trillion rubles in 2021 from 1.044 trillion rubles in 2018. Russia’s debt would amount to 14.114 trillion rubles or 14% of GDP as of the end of 2018, to 15.915 trillion rubles or 15% of GDP in 2019, to 17.850 trillion rubles of 16% of GDP in 2020, and to 19.858 trillion rubles or 16.6% of GDP in 2021.
GROWTH OF REVENUES
Incomes from dividends of state-controlled companies should more than double on the year to 542.3 billion rubles in 2019 from 250.7 billion rubles in 2018, and rise further to 585.9 billion rubles in 2020 and to 639.7 billion rubles in 2021. The ministry expects the companies to pay dividends amounting to at least 50% of their net profit as calculated under International Financial Reporting Standards (IFRS).
But privatization revenue should fall to 13 billion rubles in 2019 from 15 billion rubles in 2018. The revenue in 2019 and 2021 is expected at 13 billion rubles and 11 billion rubles, respectively, while the authority sees no income from privatization in 2021.
Financing of the 2018 May Order of President Vladimir Putin will amount to 1.17 trillion rubles in 2019, to 1.25 trillion rubles in 2020, and to 1.47 trillion rubles in 2021. The ministry also expects social policy to become the main direction of spending of the consolidated budget, with the spending amounting to about 12% of GDP per year on average in the next three years.
In the period, the spending on social policies should rise by almost 500 billion rubles, with spending on education growing to 716.4 billion rubles in 2019 from 689.7 billion rubles in 2018, to 707.9 billion rubles in 2020 and to 726.6 billion rubles in 2021. The increase of social spending and implementation of the May Order should ensure Russia’s breakthrough development, according to Putin.
IMPROVEMENT OF PENSION FUND
Changes in the pension legislation should raise the state Pension Fund’s income -- own money of the fund will rise by 5.9% to 5.174 trillion rubles in 2019, by 4.8% to 5.420 trillion rubles in 2020, and 6.8% to 5.790 trillion rubles in 2021, the ministry said in its main directions for budget, tax, customs and tariff policies for the next three years.
The government has proposed to increase the retirement age for men to 65 years and for women to 63 years in several increments starting from 2019. The initiative should ensure annual increases of pension payments above inflation and stability of Russia’s pension system.
The Finance Ministry plans to abolish a preferential excise rate for local wineries from 2019, setting a flat excise for imported and local wines. The measure also includes excises on grapes used in production of local wines, simultaneously with tax preferences for producers that use domestically grown grapes.
OIL PRICE FORECAST
At the same time, the ministry expects the world oil prices to slump if they remain above the long-term equilibrium price of U.S. $50–60 per barrel for a long time.
This year, oil prices grew mainly thanks to the crisis in Venezuela and the will of the U.S. to end oil production of Iran. “In spite of that, stable prices on the oil market are below the current figures, they are at about $50 per barrel, and we should consider the recent growth only as temporary,” the ministry said, adding that many countries can increase their oil production.
Shale oil produced in the U.S. is profitable at around $50 per barrel, while the price of $40–60 is good for shelf projects in Brazil, Angola, and Nigeria. Production of oil from bituminous sands in Canada will be profitable at $50–60 per barrel, the ministry said.
(63.1216 rubles – U.S. $1)