This document from the Russian Ministry of Finance presents data and analysis on the Russian economy and fiscal policy. It shows that Russia has a relatively low public debt as a percentage of GDP compared to other countries. The fiscal rule introduced in 2013 has helped maintain a budget surplus even with lower oil prices. GDP growth is expected to pick up in the next 18 months as investment projects progress and domestic demand strengthens. Federal and regional budgets for the first 10 months of 2014 saw increased revenues and a higher surplus compared to the same period in 2013.

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Ministry of Finance of the Russian Federation
November 2014

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2
Fundamentally strong economy
Gross Gen. Gov’t Debt (% of GDP)
Current Account Balance (% of GDP)
GDP per Capita (000’s USD)
Interest on Gov’t Debt (% of GDP)
Unemployment (% of workforce)
11.3%
12.0%
39.0%
39.5%
42.5%
41.5%
2013
2014E
Russia
A median
BBB median
1.6%
3.0%
3.8%
2.3%
(1.5)%
(1.4)%
2013
2014E
Russia
A median
BBB median
14.6
14.4
21.4
22.1
10.9
11.4
2013
2014E
Russia
A median
BBB median
0.7%
0.7%
1.7%
1.8%
2.4%
2.3%
2013
2014E
Russia
A median
BBB median
5.5%
5.7%
10.0%
10.0%
6.5%
6.4%
2013
2014E
Russia
A median
BBB median
Source: S&P Sovereign Risk Indicators, Minfin
(0.5)
0.3
-2.3
-2.4
(1.8)
(2.3)
2013
2014E
Russia
A median
BBB median
Budget deficit (% of GDP)

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GDP Growth (% Change)1
GDP per Capita (US$)2
Source: Ministry of Finance, Bank of Russia, Rosstat, IMF (World Economic Outlook Database), S&P
Current data is as at 31 March 2014 unless otherwise specified
1 As of 2013
2 As of end 2013
Budget Balance (% of GDP)
Reserves (US$bn)
Doing business rating position
S&P Rating
-7.8
1,3
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
December 2009
Current
8 988
14 819
8 000
10 000
12 000
14 000
16 000
December 2009
Current
BBB (stable)
BBB- (neg)
0
1
2
3
4
5
December 2009
Current
2009
2009
BBB- (neg)
BBB- (sta)
BBB- (pos)
BBB (neg)
BBB- (sta)
BBB
(neg)
-6.0
0,4
-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
2009
Current
120
62
40
60
80
100
120
140
Current
439
454
430
435
440
445
450
455
460
120
62
2009
Improvements since 2009

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New macroeconomic policy paradigm
Source: Rosstat, Minfin, Bloomberg
Fiscal policy:
Prudent approach based on fiscal rules;
Surplus in 2014;
Spending growth below nominal GDP growth.
Monetary policy:
Inflation targeting with 4% MT goal;
Positive real yields;
Credibility build-up and independence.
-4
-3
-2
-1
0
1
2
3
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Real 1Y OFZ yield, %
10.9
9.0
11.9
13.3
8.8
8.8
6.1
6.6
6.5
7.5
5.5
4.5
4.0
30.2
21.9
39.3
26.8
27.6
4.7
8.0
18.0
3.5
4.6
11.1
4.9
5.0
0
5
10
15
20
25
30
35
40
45
0
2
4
6
8
10
12
14
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Inflation, % YoY, eop
Federal budget expenditures, nominal YoY growth, % (rhs)

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Fiscal rule
1.The key idea: a cap on government spending 2. Counter-cyclical spending adjustment Budget rule not only does constrain excessive spending during favorable times but also keeps spending from contracting too fast in the adverse environment. Spending decrease is capped at 2.5% of total amount per year (only conditionally approved outlays can be cut).
3.Use of additional oil and gas revenues: transfer to Reserve Fund or lower public borrowing Provides needed flexibility and ability to timely react to changes in financial market conditions and economic situation
Oil price, USD/bbl
2013
2014
2015
Actual/Forecast
107.9
104
100
Base
91
93
96
Cap on spending =
non oil and gas revenues +
oil and gas revenues calculated on base oil price +
1% of GDP
Base oil price – the lowest of two average oil prices:
•10 years (5 years in 2013 and addition of 1 year each next year) or
•3 years

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61.3
49.5
42.1
31.7
23.2
14.2
9.0
7.2
6.5
8.3
9.0
9.6
10.4
11.3
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Reserve Fund
NWF
Stabilisation Fund
MinFin's operational cash reserve
Public debt
104.5
88.7
73.5
66.7
66.3
45.2
22.4
16.2
11.3
0
50
100
150
USA
EU
G-20
India
Brazil
South Africa
China
CIS
Russia
6
Achievements of conservative fiscal policy
Source: MinFin, IMF
Public debt to GDP, % (2013)
% of GDP

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3 shocks for Russia’s markets and economy
-80
-60
-40
-20
0
20
1h12
2h12
1h13
2h13
1h14
rest
net bank assets
private FX purchases
grey' capital outflow
Source: Bloomberg, Reuters, CBR, Minfin
75
80
85
90
95
100
105
110
115
120
Jan
Mar
May
Jul
Sep
Nov
Urals, USD/bbl
65
70
75
80
85
90
95
100
105
110
115
2012
2013
2014
USD/RUB
EM index
strengthening against USD
weakening against USD

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External debt: details are important
0
10
20
30
40
50
60
70
External debt repayment schedule as of july,1st 2014
Banks
Corporate ex-FDI
Corporate FDI
Government
Central Bank
USD bn
Banks and corporates: moderate refinancing risks
24% of debt is RUB denominated;
At least 26% of debt is FDI related, significant part of the debt is intra- company loans;
Significant part of the external debt concentrated on the exporters with healthy cash flows;
Corporate borrowers: accumulated liquidity cushion, access to credit lines provided by Russian banks; certain significant deals envisage advance payments
Banking sector has accumulated significant amount of net foreign currency assets
Access to markets is not fully closed.

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Shock absorption: slower demand growth and weaker currency
Source: Rosstat, CBR, Minfin
40
50
60
70
80
90
100
110
120
130
140
75
80
85
90
95
100
105
110
Real RUB vs USD (jan'08=100)
Brent, USD/bbl, avg (rhs)
0%
2%
4%
6%
8%
10%
12%
14%
16%
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
nominal
real
Domestic demand growth, % YoY

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Three pre-conditions for monetary easing: inflation (1)
Source: CBR, Rosstat *core CPI stands for headline CPI excluding food, gasoline, and regulated tariffs
Inflation and current account impact
10
3%
4%
5%
6%
7%
8%
9%
2012
2013
2014
headline CPI, % YoY
core inflation, % YoY
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
CA surplus, SA, % of GDP

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Key drivers of BoP
Source: CBR, Rosstat, Rosaviation
11
-0.5
4.7
7.0
6.1
3.1
0.4
-1.7
-5.4
-4.7
-8.7
-10
-8
-6
-4
-2
0
2
4
6
8
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
imports of goods, % YoY
0
5
10
15
20
25
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
international passenger air traffic, % YoY, 12m MA
0
1
2
3
4
5
2011
2012
2013
2014
net FX purchases by households
USD bn
60
70
80
90
100
110
120
2011
2012
2013
2014
FX retail deposits
FX corporate deposits and CA, without non-residents
USD bn

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Net exports is now the key growth driver
Source: Rosstat
Growth structure has totally changed
12
-4
-2
0
2
4
6
8
10
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
2011
2012
2013
2014
consumption
investments
change in inventories
increase in exports
decline in imports
GDP real growth, % YoY

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Source: CBR, Rosstat
-6
-4
-2
0
2
4
6
2009
2010
2011
2012
2013
2014F
Interest payments on consumer loans
Increase in consumer lending
Net impact
% of household consumption
Consumption – cyclical weakness
13
0
10
20
30
40
50
60
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014f
Private sector wages
Public sector wages
% YoY

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Consumer lending came to a standstill
Source: CBR
14
0%
10%
20%
30%
40%
50%
2011
2012
2013
2014
consumer, FX adj. 3mma saar
mortgage loans
consumer loans (ie retail loans excl. mortgages)
% YoY

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Source: CBR
Corporate access to credit
15
-2
0
2
4
6
8
10
12
14
16
18
20
2012
2013
2014
corporate bank lending, FX adj.
domestic corporate bonds
public external debt, FX adj.
total corporate debt funding
% YoY

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What is behind the slowdown in investments?
Source: Rosstat, Ministry of Economy
16
-19.5
8.4
5.3
13.2
3.5
-4.1
-0.3
-13.5
6.3
10.8
6.8
-0.2
-2.4
2.0
-30
-20
-10
0
10
20
30
2009
2010
2011
2012
2013
2014
2015
Natural monopolies
Public
Private
Total
Investment growth, % YoY

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Factors to boost growth in next 18 months
End of rebalancing process;
End of disinflation process;
End of “uncertainty” shock;
Start of actual construction phase for large-scale investment projects with financing including National Wealth Fund money;
Pick-up in investment spending by natural monopolies (Gazprom’s China deal);
End of “consumer lending” shock;
Improvements of business climate.

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Federal budget, RUB bn
10M 2014
10M 2013
Revenues
11 891
10 741
% YoY
11%
3%
Oil&gas revenues
6 113
5 360
% YoY
14%
2%
Non-oil&gas revenues
5 778
5 381
% YoY
7%
4%
import-related
1 970
1 974
% YoY
0%
-2%
domestic demand-related
2 591
2 232
% YoY
16%
1%
Domestic VAT
1 816
1 554
% YoY
17%
-3%
Expenditures
10 762
10 081
% YoY
7%
4%
Balance
1 129
659
10M 2014 fiscal results
Regional budgets, RUB bn
10M 2014
10M 2013
Revenues
7249
6618
% YoY
10%
1%
Revenues excl. transfers
6032
5488
% YoY
10%
3%
Profit tax
1685
1458
% YoY
16%
-15%
Personal income tax
2073
1937
% YoY
7%
11%
Expenditures
7031
6532
% YoY
8%
5%
Balance
218
87

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Key federal budget parameters 2014
RUB bn
2013, actual
2014, law
2014, estimation
Change
Revenues
13 019.9
13 570.5
14 183.6
+613.1
% of GDP
19.5
18.5
19.5
1.0
Oil&gas revenues
6 534.0
6 528.1
7 335.7
+807.6
% of GDP
9.8
8.9
10.1
1.2
Non-oil&gas revenues
6 485.9
7 042.4
6 847.9
-194.5
% of GDP
9.7
9.6
9.4
-0.2
Expenditures
13 342.9
13 960.1
13 960.1
0,0
% of GDP
20.0
19.0
19.2
0.2
Balance
-323.0
-389.6
+223.5
+613.1
% of GDP
-0.5
-0.5
0.3
0.8
Non-oil&gas balance
-6 857.0
-6 917.7
-7 112.2
-194.5
% of GDP
-10.3
-9.4
-9.8
-0.4

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Federal budget deficit financing 2014
RUB bn
2013, actual
2014, law
2014, estimation
Change
Total deficit financing
323,0
389,6
-223.5
-613.1
including:
Reserve Fund
-212,2
-343,6
-9.3
334.3
National Wealth Fund
5,7
9,4
12,4
3,0
Other sources
529,5
723,8
-226.6
-950.4
including:
Local financing, including
831,8
585,2
-68.0
-653.2
Net local borrowing
358,4
485,0
-75.8
-560.8
New issuance
821,7
808,7
247.9
-560.8
Redemption
-463,3
-323,7
-323,7
0,0
Privatization
41,6
196,8
30.0
-166.8
External financing, including
52,7
138,6
-158.6
-297.2
Net foreign borrowing
184,9
190,5
-47.8
-238.3
New issuance
225,3
233,8
0.0
-233,8
Redemption
-40,4
-43,3
-47.8
-4.5

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Fiscal policy 2015-2017
Fiscal policy crossroads
Spending
optimization
Higher deficit
Higher
revenues
Higher deficit
Increase in base taxes
Key decisions:
•spending optimization (above 1.0 trln RUB of cuts and RUB 495 bn shift of military spending),
•structural steps (low indexation of public wages, higher medical insurance payments for high earners),
•increase of non-critical taxes (tabacco, dividends, Blue stream, etc.)
•additional spending (infrastructure, Crimea)

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RUB bn
2013
2014
2015
2016
2017
Revenues
13 019.9
14 183.6
15 082.4
15 795.5
16 547.8
% of GDP
19.5
19.5
19.5
19.0
18.4
Oil&gas revenues
6 534.0
7 335.7
7 717.2
8 032.0
8 207.9
% of GDP
9.8
10.1
10.0
9.7
9.1
Non-oil&gas revenues
6 485.9
6 847.9
7 365.1
7 763.5
8 339.9
% of GDP
9.7
9.4
9.5
9.3
9.3
Expenditures
13 342.9
13 960.1
15 513.1
16 271.8
17 088.7
% of GDP
20.0
19.2
20.0
19.6
19.0
including:
Unallocated expenditures
406.8
854.4
% of total expenditures
2.5
5.0
Balance
-323.0
+223.5
-430.7
-476.3
-540.9
% of GDP
-0.5
0.3
-0.6
-0.6
-0.6
Non-oil&gas balance
-6 857.0
-7 112.2
-8 148.0
-8 508.3
-8 748.8
% of GDP
-10.3
-9.8
-10.5
-10.2
-9.7
Key parameters of federal budget 2015-2017

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Reaction scheme to revenue shock
Unallocated spending
Anticrisis Fund
Reserve Fund
Spending optimization

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Possible fiscal adjustment measures
Improve pension system – 2.0% of GDP;
Better targeted social transfers and benefits – 1.5-2.0% of GDP;
Cut tax expenditures – 1.0% of GDP;
Reduce wage bill – 0.9% of GDP;
Improve tax structure – 0.5% of GDP;
Increase excise taxes – 0.5% of GDP;
Improve capital budgeting – 0.4% of GDP.

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Debt policy
Flexible approach:
1.Fiscal rules, substantial balance on the Treasury account and lack of tangible refinancing risk allow for greater flexibility in the timing and sizing for bond offerings.
2.Domestic and Eurobond market supply is fine-tuned based on investors’ demand structure.
Source: MinFin, CBR
172
416
621
1 080
511
358
-76
280
297
546
-200
0
200
400
600
800
1000
1200
1400
1600
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Local borrowing, RUB bn
New issuance
Redemption
Net
-3.2
-1.5
4.0
-2.3
5.2
5.8
-1.3
3.7
5.7
3.7
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
New issuance
Redemption
Net
Foreign borrowing, USD bn

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Russia vs EM countries: local bond market
Source: Bloomberg, national statistical agencies, MinFin
7.1
8.3
8.8
10.0
12.7
6.0
10.1
7.6
7.9
8.6
0
2
4
6
8
10
12
14
Mexico
Russia
SAR
Indonesia
Turkey
core inflation + potential growth, %
10-year bond yield, %

27. М
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•Over the last 5 years the OFZ market has grown by an average of 25% per year (2.2 trln. roubles over 5 years) although increase over the past 2 years has been more limited
•Russian banks are anchor investors in the OFZ market. They buy government bonds for refinancing through REPOs with the Bank of Russia. OFZs are the main refinancing tools that are used as collateral by banks and comprise 45% of total collateral used by banks with the Bank of Russia
•Non-resident share is stable and comprises 23% of the outstanding OFZ market
Source: Bank of Russia, Ministry of Finance
Russian Banks 60%
Non-residents 22%
Bank of Russia 7%
State (VEB) and private and pension funds and management companies 11%
0%
5%
10%
15%
20%
25%
30%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
OFZ Market, trln. Roubles (LHS)
Non-resident share (RHS)
OFZ Market