Record high growth in tax revenues is continuing

Analysis of preliminary data on budget execution by Russian regions in 9M 2021

The preliminary data actual as of September 30, 2021 published on the Unified Portal of the Budgetary System of the Russian Federation indicate that the tax and non-tax revenues (TNTR) of Russian regions grew in nine months of 2021 by 28% y-o-y and by 20% compared to the same period of 2019. The total volume of TNTR of regional budgets amounted to RUB 8,174 bln. The Khanty-Mansiysk Autonomous Okrug — Ugra and the Sakhalin Region are the only regions where revenues declined slightly
(-1% and -3%, respectively), while the maximum growth is observed in the Lipetsk Region (a two-fold increase in TNTR), Belgorod and Vologda Regions (+90% and +80%, respectively), which is associated with growing metal prices.

The total volume of transfers to regional budgets have not decreased and amounted to RUB 2,500 bln against RUB 2,499 bln for the same period of 2020. At the same time, for almost half of the regions, transfers were lower than a year earlier. The most noticeable decrease was observed in the Sakhalin Region (-28%), the Republic of Tatarstan (-25%), the Komi Republic (-23%), and the Lipetsk Region (-21%).

The total revenue of the regions amounted to RUB 10,674 bln (+ 20%), expenditures reached RUB 9,787 bln (+ 6%). The intermediate surplus for the nine months of this year reached RUB 888 bln, more than doubling compared to the first half of 2021. The deficit was observed in 14 regions; in absolute terms, maximum deficits were noted in the Leningrad Region (RUB 10.2 bln, or 11% of TNTR for 9M 2021), the Republic of Crimea (RUB 4.1 bln, 10%), the Ulyanovsk Region (RUB 4.5 bln, 12%), the Tomsk Region (RUB 3.7 bln, 10%) and the Republic of Bashkortostan (RUB 3.5 bln, 3%). The aggregate budget deficit of deficit regions amounted to RUB 35.6 bln.

The maximum absolute surplus is in Moscow (RUB 121.4 bln, 5%), St. Petersburg (RUB 73.4 bln, 14%), the Chelyabinsk Region (RUB 49.7 bln, 33%), the Belgorod Region (RUB 40.3 bln, 42%), and the Krasnoyarsk Krai (RUB 40.1 bln, 19%).

It should be noted that a year earlier, regional budgets demonstrated an intermediate deficit of RUB 355.8 bln (5.6% of aggregate regional TNTR).

Taking into account the current trend in the aggregate execution of regional budgets, ACRA is of the opinion that by the end of 2021, aggregate TNTR of the regions may significantly exceed RUB 11 bln and turn out to be significantly (over RUB 1.3 bln) higher than the aggregate TNTR planned by the regions.

Taking into account the current practices of cost allocation, ACRA expects that in Q4 2021, the expenditure side of the aggregate budget of regions will grow relative to previous quarters, so that the aggregate expenditures will increase by almost 6% compared to the previous year, but still they will be slightly below the planned level.

It is obvious that the deficits planned for the current year (in total, about RUB 1,500 bln) will not be achieved. Depending on the volume of transfers and the final budget expenditures, the total deficit may turn out to be insignificant (less than 1% of the TNTR). Thanks to this, as well as the measures of support to regional budgets, mostly debt restructurings, the financial sustainability of many regions of the Russian Federation will grow.

Execution dynamics of the aggregated regional budgets, RUB bln

*preliminary data
Source: Ministry of Finance of Russia, Federal Treasury Office, ACRA's calculations