Russia's federal budget posted a surplus of RUB500bn ($5.2bn) in September, despite a sharp rise in spending, according to data released by the Ministry of Finance on October 10, Renaissance Capital reports. (chart)

Revenues grew by 19% y/y to reach RUB3.3 trillion ($34bn), with a cumulative 33% increase in the first nine months of 2024. This growth was driven by a 4% rise in oil and gas revenues, which jumped 49% over the same period, while non-oil and gas revenues surged 24%.

At the same time, government expenditures surged 34% y/y in September, reaching RUB2.8 trillion, bringing total spending for the first nine months of 2024 to RUB26.6 trillion ($277bn), up 23% compared to the same period in 2023.

The September surplus helped lift the year-to-date budget balance to a modest RUB200bn, equivalent to 0.1% of GDP. However, the Ministry of Finance still anticipates a year-end deficit of RUB3.3 trillion, or 1.7% of GDP, due to a substantial increase in spending during the final quarter, says Renaissance Capital.

The updated budget plan for 2024 suggests significant outlays in the fourth quarter, amounting to RUB13.3 trillion, or half of the spending from the first nine months of the year.

Renaissance Capital analysts warn that this level of fiscal stimulus could continue to fuel inflation and boost demand well into 2025. If these funds are not fully spent by year-end, "technical" carryovers into 2025 could reduce the expected cutback in stimulus for next year.

“We expect the Central Bank of Russia to raise its key interest rate by 1 percentage point to 20% at its upcoming October 25 meeting,” Rencap noted.