RBC investigation: the lost decade of the Russian budget

On December 9, the State Duma adopted the country's budget for 2017-2019 in the final reading, which can be considered a historical event, at least on paper. Russia reduced government spending in nominal terms for the first time during the reign of Vladimir Putin since the early 2000s.
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Russia under Putin has continually increased its spending - social security for the defense industry, in the bureaucracy. This allows you to go up and in recent years, until the collapse of 2014, obscenely expensive oil.

Everything changed in 2014. Authorities continued by inertia to spend money to send hundreds of billions of rubles on anti-crisis programs to support industries to pay the promised increase pensions and benefits, but the sanctions for the government closed the international financial market and geopolitical environment glowing forced to spend on military targets more and more. The collapse in oil prices has led to a dramatic reduction in oil and gas revenues and the Treasury had to spend all the savings reserve funds.

The turning point was the 2016, which resulted in the budget will miss more than 2.6 trillion rubles. oil and gas revenues (compared to 2014), and their share in the total income is reduced to 36% (compared with 50% two years ago). Spending will peak because of state defense enterprises, and the budget deficit will rise to a maximum of six years. The government has decided that you can not continue to live like that, and get ready to tighten their belts.

Russia is poorer than it seems

In nominal terms, the budget expenses in the following year decline for the first time since the early 2000s, though only slightly, while revenues are expected to grow in 2019 by 11% compared to this year. Due to advanced growth of government revenue is calculated to reduce the budget deficit to 1% of GDP in 2019 compared to 3.7% of GDP in 2016-th.

A somewhat different picture is opened, if you look at the dynamics of the budget in real terms - at constant prices (conversion methodology, see "How we felt" at the end of the study.). It turns out that the expenditure part of the budget is reduced from 2014, that is, for the third consecutive year, which is consistent with an intuitive sense of the notorious "no money." And by 2019, if all goes according to plan, the Ministry of Finance harsh, real spending will shrink by 15.7% compared to 2016. So, right now Russia is approximately in the middle of a five-year cycle of compression budget expenditure in real terms.

The real income over the upcoming three-year almost did not grow, frozen near the mark of 13 trillion rubles. - The level of 2009-2010. And by the end of 2019 revenues, adjusted for inflation, will not exceed the comparable values ​​of 2016.

Costs are reduced in parallel with economic activity (GDP in 2016 will decrease for the second year in a row). It turns out that the Russian authorities have opted to follow the so-called pro-cyclical policies and reduce the budget when the economy is in recession. It acted as the problematic euro zone countries after the global financial crisis of 2008-2009, and it has not helped them to revive the economy.

Some experts, in particular with the economic faculty of Moscow State University, in his report on the 2017-2019 budget's believe that in the current economic crisis, the Russian fiscal policy should be countercyclical, ie actively stimulate economic growth. The deficit will be increased by privatization and domestic borrowing, and fiscal consolidation can begin later, when economic growth resumes. But the authors of the budget of the Ministry of Finance does not agree with such a scenario.

Revenues: Faithfulness VAT and windy petrodollars

In an era of prosperity of the oil revenues from foreign trade, folding mainly of export duties on oil, gas and petroleum products, brought to the state from 30 to 41% of total revenues, seen from RBC. The current time to low oil prices led to a reduction of this share is below 20%.

Amid falling incomes directly depend on world oil prices, the structure of the revenue part of the dramatic changes in our eyes. The authorities have begun to actively compensate for foregone oil and gas revenues increasing revenues from domestic taxes (VAT and excise duties), as well as an increase in the tax on mineral extraction (MET), which at low energy prices covers the reduction of export duties.

As a result, according to the data of RBC, the share of revenues from the internal VAT and excise duties will increase in 2019 by more than 10 percentage points with respect to 2014 and will exceed 30%. The authorities attributed a significant part of the growth of the VAT on the improvement of administration (VAT ASK-2, an automated system of control over the payment of taxes). Since 2017 the government significantly increases the excise tax on tobacco and alcohol, introducing excise tax on electronic cigarettes and nicotine liquid. In addition, the three-year draft budget relies on a number of "mobilization" solutions, such as collection from state-owned companies and the Federal State Unitary Enterprise 50% of the profits as dividends.

Budget expenditure: the war and the world

Security forces, military, and social support - that is the main part of the federal budget.

From the point of view of Russia's budget spending power and social. The biggest share of the costs traditionally occupies "Social Policy" section (social benefits, transfers to the Pension Fund, etc.), by 2019 these costs will reach almost 30% of the total budget.

In 2016, social expenditures comparable expenditure on defense (27.1 and 22.8%, respectively). But in the next three years, defense spending will be reduced and will not exceed 16.7% of expenditure, unless, of course, the military does not prolobbiruyut, as in 2016, a sharp increase in appropriations compared with planned. Meanwhile, military spending sequester, seems quite consistent with "pacifying" the tone of the recent Putin's address to the Federal Assembly: "We do not want confrontation with anyone, we do not need, neither we nor our partners nor the world community. Unlike some foreign colleagues, who see Russia as an enemy, we do not seek and has never sought the enemy. "

Another "power" article - national security spending - in recent years, remained at the level of 12,5-15,5% of the overall costs, but declined to 11.4% in 2016. During the next three-year budgetary spending on law enforcement and investigative agencies, internal forces and security services will be stable balance near the mark of 11% of the total budget.

Spending on health and education are traditionally considered investments in human capital, and in the federal budget perspective, these investments are not doing well. But relatively low (and falling), federal spending on these objectives should not be misleading: if you look at the budget system as a whole (the federal budget, regional budgets and off-budget funds), the numbers look quite different, since the bulk of spending on education and health care falls shoulders regions. For example, in 2015 the total cost of the federal center and the subjects of health care accounted for 22% and education - 23% of the total expenditure of the budget system. This is comparable to defense spending, the share of which in the consolidated budget accounts for 24%.

What is the optimism of the Russian debt

Public debt - is not the biggest problem in Russia. At the end of 2016 it will amount to little more than 16% of GDP, while, for example, the euro area public debt exceeds 90% of GDP, the US national debt - 100% of GDP. But the authorities are gradually increasing, and it is not going to stop: it is debt to help finance the budget deficit at the exhaustion of the reserve funds.

In 2016, the sum of external (translated into rubles at the exchange rate of the Ministry of Economic Development of the forecast), and the domestic public debt is expected to grow to 653 billion rubles. Thus already in 2017 growth should reach 1.48 trillion rubles, in 2018 -. 1.54 trillion rubles. In 2019 the authorities plan to slow down loans - to 1.41 trillion rubles. Thus, in 2019 the size of government debt was 15.4 trillion rubles., Which is slightly less than the general budget in the same year.

In terms of reserves depletion is government loans are becoming an important source, which is covered by a budget deficit. Accordingly, the annual increase and the costs of debt service. Even last year they accounted for 556 billion rubles., But by 2019 th reached 870 billion rubles.

The authorities are betting on home loans: in 2016, for example, their share in total debt is 66.7%, and in 2019 its size will increase to 75.2%. The fact that the Ministry of Finance hopes mainly on domestic borrowing, head of the Ministry Anton Siluanov said in June at the St. Petersburg Economic Forum. "Because with external borrowing, see - everywhere are trying to insert a stick in the wheel of us. You can, of course, to enter the market of foreign borrowing more aggressive, but you should understand that investors now do not want to quarrel with foreign authorities ", - he explained.

All the secrets of the state budget

The budget of a high proportion of non-transparent spending, which can include as classified expenditure and with some reservations made passing under "other expenses". Most often, the authorities tend to classify the costs of the military and security forces.

Budget expenditures are not always transparent or more transparent only under Articles. Share the secret spending has steadily increased since 2012 - if then it was 11.6%, the 2016 increase to 21.8%, which would be the post-Soviet high. But next year the government will reduce the cost secret: already in 2017, they should make only 17%, in 2018 - 16.7%, and in 2019 back to the level of 17%. According to the amendments for the second reading of the budget on December 7, the authorities have setup remove from the classified section of at least the costs that are not directly related to defense and national security.

Traditionally, the most sensitive item is "National defense": in 2016 the share of hidden costs on it is 71.9%. The second place is taken by secret expenditure on national security and law enforcement (33.17% of the total expenditure under this heading). Data on other sections are more transparent: the share of hidden costs do not exceed 9% of them.

As we considered

In a country where prices are rising by an average of 9.5% per year (Rosstat data for 2006-2015), nominal monetary figures by themselves are not able to give a complete picture. For example, if public expenditure on health increased in nth year by 10% compared with the previous year, while inflation stood at 20%, it is obvious that we can not speak about a real increase in costs.

To ensure the comparability of budget data and trace data "real" dynamics of state revenue and expenditure, we have corrected the data on the average annual inflation, counting their prices to 2016. In other words, the budget revenues and expenditures, expected by the end of 2016 (according to the October amendments to the budget of the Ministry of Finance), were taken as a starting point, and the actual figures of previous years restated for inflation. Thus, the adjusted figures of recent years were higher than the nominal value, and the rate of subsequent years - below. None of the methods of bringing the nominal figures to real is not perfect, but the plus of annual inflation that is intuitively understood by the rise in prices more than, for example, special deflation factors calculated by Rosstat.

In addition, data on the average annual inflation rate from 1990, based on statistics from Rosstat, is in the database of the International Monetary Fund (IMF), and the predicted values ​​of the average annual inflation for the years 2016-2019 are taken from the Ministry of Economic Development of basic macroeconomic forecast underlying the budget projections. "In the current environment, I would have deflated the consumer price index, as, firstly, it is more than is customary, and secondly, another deflator is now really no", - he confirmed the relevance of the calculation RBC senior analyst group research and forecasting ACRA Dmitry Kulikov.