AK&M Rating Agency presents results of this year's review of relative creditworthiness of Russian federal subjects

Only 9 regions of Russia had a 12-month budget surplus in 2014 (Kaliningrad, Leningrad, Lipetsk, Sakhalin, Tyumen regions, Republic of Ingushetia, the Altai Republic, Khanty-Mansi and Yamalo-Nenets autonomous areas). It should be noted that four of these federal subjects are oil producing regions, two more are beneficiary regions where the share of non-repayable receipts from other budgets to the regional budget exceeds 70%), according to a review of the relative creditworthiness of Russian federal subjects prepared by AK&M Rating Agency.

20 regions, i.e. one in every four of the remaining federal subjects, faced budgetary gaps exceeding 10% of their respective fiscal revenues. The regions avoiding such dramatic budgetary underperformance have achieved a relatively good result in 2014.

As usual, Moscow is on top of the composite ranking scoring a total of 80.78 points. The capital of Russia took the lead in total incomes unadjusted for non-repayable receipts from other participants of Russia's budgetary system (RUB 1.514 trillion) and in the balance of large and medium-sized businesses' profits and losses (RUB 1.457 trillion).

At the same time, the top 5 group saw notable shifts. In particular, Tyumen region moved up three positions and rounded out the top 3 (67.75 points). The region is among the three top performers in four indices at one; of special note is the budget surplus / shortfall to budget revenues ratio improvement bringing the region to the top 3 (4.36%) from the 82nd position (-25.65%) in 2013. The reason for this advancement is that the region had a budget surplus of RUB 6.99 billion in 2014 (the best performance since 2008) against a budget gap of RUB 32.7 billion the year before.

For the first time ever, Sakhalin region ranked fourth rising from the seventh position where it had stayed for three years before that (66.58 points). For the first time in seven years, the region made its way into the top 5 on the composite ranking. In terms of the government debt to budget revenues ratio, Sakhalin region shared the first place with Nenets autonomous area as governments of these regions are not in debt at all. The region also leads in the budget surplus / shortfall to budget revenues ratio (14.86%). In particular, the budget surplus of Sakhalin region was RUB 23.1 billion in 2014 against a budget gap of RUB 2.08 billion the year before. Budget revenues increased by 63% to RUB 155.48 billion from RUB 95.18 billion in 2013.

Khanty-Mansi autonomous area - Yugra took one step up the ranking from the third to second position (70.67 points). Yamalo-Nenets autonomous area retained its fifth position on the ranking (63.08 points). On the contrary, Nenets autonomous area lost four positions, now ranking sixth with 62.64 points. The region ranks 83th in terms of the percentage of profit-making businesses (51% against 64% in 2013).

St. Petersburg lost three positions moving down from the fourth to seventh position (62.54 points). While the city improved its performance in a number of criteria compared with the previous year, it lost 20 positions in terms of the budget surplus / shortfall to budget revenues ratio plummeting from the 2nd to 22th position (-3.35%) as its 2014 budget gap amounted to RUB 14.54 billion against a surplus of RUB 15.15 billion in 2013. At the same time, the region increased its incomes to RUB 433.63 billion from RUB 415.49 billion.

Leningrad region landed on the top 10 advancing from the 14th to 10th position (52.61 points scored). The region switched swapped with St. Petersburg in terms of the budget surplus / shortfall to budget revenues ratio (10.91%) moving 20 positions upwards (from 22 to 2). In 2014, the budget surplus of Leningrad region was RUB 13.35 billion whereas a gap of RUB 5.23 billion in 2013.

The Republic of Tatarstan improved its performance to 13th from 16th position (49.81 points), the strongest result for the region since 2008. The republic is among the top 5 leaders across Russia in the percentage of profitable businesses (77.8%) and among the 10 top performers in the balanced financial result of large enterprises (RUB 213.7 billion) and in the capital investment per capita (RUB 141.1 thousand).

Most of the regions in Russia's Central Federal District improved their positions in 2014. Kursk region advanced four positions (from 27 to 23, 46.07 points), the strongest result in seven years. Kursk region is among the top 10 leading federal subjects in terms of the percentage of profit-making businesses (76.3%) outperforming even Moscow. The region is among the top 20 regions in terms of total budget revenues (22.88%), outstripping Moscow region.

Belgorod region improved its performance considerably moving up 11 positions (from 53 to 42), with 39.43 points scored. In particular, the region soared from the 59th to 14th position in terms of the budget surplus / shortfall to budget revenues ratio (-2.09%). In 2014, Belgorod region reduced the budget gap to RUB 1.62 billion from RUB 9.9 billion in 2013. Also, it made its way into the top 10 group in terms of the balanced financial result of large enterprises (9th position, RUB 184.05 billion).

There were also notable improvements in Tula and Ryazan regions. Tula region advanced from the 26th to 17th position (48.25 points scored). The ratio of own to total budget revenues reached 86.41%, the local government debt to budget revenues ratio being 24.38%. Ryazan region moved up 10 positions reaching the 41st position (39.48 points). The region reduced the budget shortfall from RUB 6.79 billion to RUB 1.93 billion and advanced from the 26th to 11th position in the percentage of profit-making businesses (76.1%).

The biggest performance failure reflected in the composite ranking was in Astrakhan region which scored 34.52 points and fell from the 45th to 64th position (19 positions downwards). The region sank from the 28th to 74th position in terms of the budget surplus / shortfall to budget revenues ratio (-14.48%). The budget gap went up from RUB 2.65 billion to RUB 5.71 billion, budget revenues decreased from RUB 39.75 billion to RUB 39.43 billion.

Last year, the Komi Republic also demonstrated the worst performance in seven years moving from the 27th from 21st position in 2013 (45.08 points). The Republic is still among the top 10 leaders in the amount of capital investment per capita (RUB 238.9 thousand) and in the value of goods and services produced per capita (RUB 668.9 thousand). However, the region ranks 46th in terms of the local government debt to budget revenues ratio (48.22%) and 79th in terms of the budget surplus / shortfall to budget revenues ratio (-16.6%).

The Udmurt Republic moved 13 positions downwards to the 56th position (36.83 points). The region fell from the 69th to 82nd position in terms of the budget surplus / shortfall to budget revenues ratio (-20.69%). The percentage of profit-making businesses was 68.70% bringing the region down to the 43rd position from the 28th position in 2013.

In the lower part of the ranking, the Republic of Mordovia improved its result (30.28 points) advancing 8 positions (from 80 in 2013 to 72 in 2014).

Just as the year before, the Republic of Ingushetia is on the bottom of the 2014 relative regional creditworthiness ranking scoring a mere 18.32 points. Being among the top 10 leaders in terms of the budget surplus / shortfall to budget revenues ratio (0.69%), the region is still extremely underperforming in other performance metrics.

AK&M Rating Agency has been annually publishing an updated review of relative creditworthiness of Russia's federal subjects since 2001. Based on the aggregation of quantitative budget performance indicators and economic development parameters, this review enables the comparison of regions in their ability to meet debt obligations.