Budget Overview: Is it disinflationary?

Macroeconomics

The government submitted to the State Duma the draft budget for 2025-2027, which assumes a reduction of the deficit to RUB 1.2 trln from RUB 3.3 trln expected by the Minfin in 2024. This is deemed possible thanks to an increase of the tax burden, which should provide for faster growth in revenues relative to expenditures. As a result, the budget impulse may decrease to pre-COVID levels. Despite the reduction of the deficit, the need to raise debt will expand to RUB 4.8 trln from RUB 4.0 trln in 2024 due to an expected halt in spending of NWF funds. Forced growth in tariffs and a raising of the minimum wage alongside departure from the usual conservative revenue forecast in 2025 may serve as inflationary risk factors, despite the shrinking deficit. The materialization of risks (excessive growth in price pressure or deviation of revenue collection from the plan) may require additional monetary tightening.