Figures on GDP by expenditure for the first half of the year released by the Federal State Statistics Service (RosStat) indicate that growth has been driven mainly by domestic demand. Domestic consumption grew by 6.6% in the second quarter on an annual basis, while investment increased by 17.1%. The contribution from exports to growth remained marginal, while imports grew by more than 23.4%, another indication of strong domestic demand. Industrial output growth, however, slowed significantly in September to 3.9% on an annual basis. The main cause is attributed to manufacturing, which rose by 4.4% in September, down from 7.1% in August (EIU, Country report, November 2011). Consumer spending also continued to pick up, with retail sales volumes increasing by 9.2% over a year ago. According to preliminary estimates released by the Central Bank of Russian Federation (CBR), the balance of payments surplus continued to rise in January- September, mainly because of higher oil revenue.
The capital account however, registered a significant $48 billion outflow in the same period compared to $9.4 billion a year earlier. The net outflow from the non-banking sector was $31 billion, with net outflow on the direct and portfolio investment accounts composing the bulk of the net outflows at just over $20 billion. The RCB reported a net outflow of $13 billion in September alone, but it did not predict an acceleration of outflows. Foreign debt reported at $519.3 billion at the end of September. Non-financial corporate sector debt accounted for the bulk of this increase as this item was reported to be raised by $27 billion in the 12 months to September, according to the CBR.
The Russian government has published a detailed budget proposal, according to which the budget deficit is estimated to remain at 2.7% of GDP in 2012 and 2013, reducing to 2.3% in 2014. Public sector expenditure is to increase by 10.7% in 2012 on an annual basis. National security and defense will receive most of the additional budget provision with 37.2% and 20.5% increases, respectively. Social expenditure, with more than 31% of total spending, is to rise by more than 20%, mainly to cover pension and other funds outside the budget (EIU, November 2011).