Thus, the Russian economy in 2021, according to data, voiced by President Vladimir Putin, grew by about 4.5%, while the budget planning was based on a forecast of 3.3% growth. The average price of Russian Urals oil last year was $69 per barrel, while the initial forecast was $45.3. The physical volumes of oil and gas production in January-November 2021 exceeded the previous year by 2.3%, which can also be attributed to the growth factors in oil and gas revenues, the HSE expert writes.
The main source of tax revenues for the Russian budget is VAT, whose share (both domestically and on imported goods) in total budget revenues increased from 27% in 2013-2014 to 36% last year. VAT receipts increased by 28% compared to 2020. “The drivers of this growth were the recovery growth of the economy mentioned above, the reduction in cross-country mobility of the population, the reduction in the propensity to save, including the reduction in the growth of cash in the hands of the population, and the acceleration of inflation,” says the HSE economist.
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The import of tourism services (that is, in fact, the spending of Russian tourists abroad) in 2021, although slightly recovered compared to 2020, still remained three times lower than in pre-Covid 2019: $11.8 billion against $36 .2 billion (data of the Central Bank). Much of the money not spent abroad in 2021 was presumably spent by Russians on domestic purchases, boosting economy-wide VAT revenues.
In January-November, retail trade turnover in real terms (in comparable prices) grew by 7.5% compared to the same period of the previous year and turned out to be 4% higher than in the same period of pre-Covid 2019, follows from Rosstat data.
The growth rate of VAT on imported goods was affected by the growth of imports (by 27% in 2021) and the nominal depreciation of the ruble, Chernyavsky notes.
Impact of inflation
The HSE Development Center does not provide estimates of the contribution of global and domestic inflationary processes to the growth of budget revenues. In 2021, Russian commodity exports, according to the Bank of Russia, jumped one and a half times, to $490 billion. Moreover, the export value of Russian oil and oil products increased by about 50%, Russian fertilizers – by 66-84%, ferrous metals – by 85%, aluminum – by 66%, follows from the FCS data for 11 months of 2021. As a rule, the Russian budget collects export duties on oil and gas, but in 2021 the government also introduced temporary duties on the export of some lumber and metals in order to contain the growth of domestic prices for these goods. At the end of the year, the authorities collected more than 300 billion rubles. “other” export duties (not for hydrocarbons), follows from the data of the Treasury as of January 1, 2022.
The acceleration of inflation should also have affected the collection of domestic VAT (for example, the FTS noted in December that the increase in VAT payments in 2021 was partly due to rising producer prices in the oil and gas and metallurgical industries).
Federal budget expenditures in 2021 increased by 8.5% compared to the previous year, to 24.8 trillion rubles, but in real terms, taking into account the average annual inflation of 6.7%, they increased by only 1.7%, the expert notes. In relation to GDP, spending decreased from 21.3% in 2020 to 19.1% in 2021. The share of spending on social policy and interbudgetary transfers has significantly decreased, which is associated with a reduction in emergency anti-COVID spending, Chernyavsky believes. At the same time, the share of expenditures under the “National Economy” section increased from 15.3% in 2020 to 17.6%, a significant part of the expenditures on national projects is taken into account in this area, the expert notes.
Inflation directly affects the level of nominal budget expenditures. The cost of government contracts for construction, repair and reconstruction in 2022-2024 may increase by 301.5 billion rubles. due to the rise in the cost of building materials, RBC reported in January. In 2022, the authorities decided to further index the insurance old-age pensions in order to fully compensate pensioners for the increased inflation in 2021, which amounted to 8.4%. This will require about 170 billion rubles. in the current year. But the rise in prices cannot be fully reimbursed from the budget for both business and the population, Finance Minister Anton Siluanov warned. “Compensation for rising inflation may have a secondary effect that will affect the increase in inflation. We need to endure,” he said on January 14.