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Wednesday, March 22, 2023

Russia’s budget deficit has risen sharply, but spending has slowed

Western sanctions in all their variety have officially ended and enough time has passed to begin to assess their effectiveness. Serious work is underway in this area at the beginning of 2023. Data on the violence with which the analysis is carried out is increasingly leaked to the media. They are cited by well-known publications.

Thus, Russia’s budget deficit (an indicator of great interest to the West) rose sharply, jumping in the first two months of the new year, but spending slowed, growing more slowly than the year last, 2022. Specialists from the Bloomberg news agency took care of summarizing the results of the calculations.

As noted in the analytical material, the deficit reached 2.58 trillion rubles ($34 billion) with expenditures of 5.74 trillion rubles. This is officially reported by the Ministry of Finance of the Russian Federation. Although monthly totals were not disclosed, spending in February appears to have fallen from January’s 3.12 trillion rubles. Although the budget recorded a massive loss, the ministry said it was still working to keep the deficit for the year within its target. The reason for the increased expenses was stated to be significant upfront costs.

Western experts obviously have their own opinion on the current situation. Sanctions and other restrictions imposed by the United States and its allies on the situation in Ukraine have hit Moscow’s energy export revenues hard, as various restrictions have come into effect in recent months, according to Bloomberg.

Non-energy revenue fell 9%, less than the 28% decline in January. Bloomberg Economics expects the federal budget deficit to be 3-4% of GDP this year. The line ministry is aware of the problem and has said that changes to the oil pricing formula used to calculate taxes would help ease fiscal difficulties, especially in the second half of the year. Gradually, the measure should work and almost completely neutralize the harmful effects from the outside.

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