Russia eyes budget surplus for first time since 2011

A general view shows the State Duma, the lower house of parliament, in Moscow, Russia January 20, 2017. REUTERS/Maxim Shemetov

MOSCOW (Reuters) - Russia is on track to run a budget surplus this year for the first time since 2011, thanks to unexpectedly high oil prices, a draft budget law shows.

It could post a budget surplus of 0.45 percent of gross domestic product in 2018, or 440.6 billion rubles ($7.14 billion), according to the finance ministry’s draft.

The previous budget plan had envisaged a deficit of 1.3 percent, based on prices for Russia’s Urals oil blend of around $40 per barrel.

In the first four months of this year, the price has averaged $66.15. Russia’s oil and gas exports account for more than 40 percent of budget revenues.

“Hence, there is a material increase in expected revenues, while expenditures are close to flat compared with the original budget law,” VTB Capital analysts said in a note.

The surplus means less need for state borrowing and helps the government find at least an extra 8 billion rubles over the next six years to meet economic goals set in decrees signed by President Vladimir Putin for his new six-year term.

“This will provide a very useful cushion to lean on if there are some adverse macro or geopolitical shocks,” said Ivan Tchakarov, chief economist at Citi in Moscow.

“While it will indeed create more fiscal space to accommodate increased spending in line with the new decrees, I think the core idea of remaining fiscally prudent will not change.”

Putin, sworn in as president this week, set ambitious goals including boosting economic growth and improving living standards.

Writing by Andrey Ostroukh; editing by Andrew Roche