OREANDA-NEWS. July 13, 2010. Russia’s Finance Ministry reported 1H10 budget implementation figures, revealing revenue of RUB4bn and expenditures of RUB4.44bn, implying a fiscal deficit at 2.3% of GDP.

View: The Finance Ministry’s figures suggest a robust June fiscal performance in which the budget was balanced with a RUB23.4bn surplus as revenues were up 38.5% MoM to RUB800bn. Expenditures saw a 23.5% MoM rise, to RUB776bn.

While increase in expenditures is a function of seasonality, we also are not overly enthused by the revenue performance. Because neither customs nor tax revenue demonstrated sharp MoM improvement, we believe the robust revenue growth reflects accounting for the one-off 2009 CBR profit of RUB188bn, and for this reason we treat the 1H10 figures neutrally.

From our standpoint, the 2.3% fiscal deficit level cannot be sustained as it was primarily due to one-offs that accounted into the 1H10 figures, while expenditures tend to increase towards year’s end. Nevertheless, we think the government will be able to mainatin a deficit within its new 5.4% of GDP deficit target.