Federal budget performance in January hints that economic growth gradually decelerates, inflation to remain high

RUSSIA ECONOMICS - In Brief 12 Feb 2025 by Evgeny Gavrilenkov

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The Ministry of Finance reported that the Federal Budget was in deficit in January despite the fact that its total revenues grew by 11.4%, i.e., above inflation, albeit not much. Oil-and-gas (O&G) revenues were up by 16.8% y-o-y, while non-O&G revenues increased by 9.3% y-o-y, which was below inflation. These numbers could signal that in January, economic growth somehow decelerated and that this deceleration could last throughout the year. The non-O&G revenues in January amounted to a mere 6.4% of the annual plan. O&G revenues accounted for 7.2% of the annual plan. Meanwhile, the 2025 revenue plan looks not too ambitious relative to the 2024 actual revenue number (up by 9.8%). On the expenditure side things looked somewhat different as the government spent in January 10.% of the annual plan and this spending grew by over 73% y-o-y. So far, the 2025 federal budget expenditures are supposed to rise by a mere 3.2% compared to the actual 2024 results. Though, one cannot rule the traditional amendments in mid-year. Due to the generous spending in January that followed even more generous spending in December 2024, inflation will likely remain elevated for a longer period. Hence the CBR will likely remain cautious and the key rate will remain elevated.