Central Bank of Russia: Draft budget gives smaller impulse to demand relative to July forecasts, but larger one relative to previous projections

MOSCOW. Sept 30 (Interfax) - The trajectory of the structural primary deficit in the coming two years laid down in the new budget projections is somewhat lower than the assumptions of the Central Bank of Russia's July baseline forecast, according to the draft monetary policy guidelines submitted by the regulator to the State Duma.

According to the new projections, the structural primary deficit will gradually shrink to 0.6% of GDP in 2027 and 0.2% in 2028. Its reduction to zero is envisaged in 2029, while maintaining a lower base price for oil in the fiscal rule. The Central Bank, not having new inputs on the budget at hand, proceeded in its July forecast from a primary deficit of 1% of GDP in 2027 and 0.5% in 2028.

"Other things being equal, this means a somewhat smaller contribution of budget policy to aggregate demand than was assumed in July. At the same time, this contribution in 2026-2028 remains more significant than it was in the budget plans before their revision in 2026 [it was announced in June in general terms, without figures], which envisaged a return to a zero structural primary deficit already this year," the document said.

With limited possibilities for expanding supply, higher government demand should be accompanied by more restrained dynamics of other components of domestic demand so as not to create additional inflationary pressure, the Central Bank said.

The CBR will take the new parameters of budget policy into account when updating its medium-term macroeconomic forecast, which will be published following the board of directors' meeting on October 23.