Page 71 - Russia OUTLOOK 2023

8.5% of 2022 projected GDP, and the volume of the fund's liquid assets (funds
in CBR accounts) amounted to RUB7.6 trillion (5.7% of GDP).

In the law on the 2023-2025 federal budget, the deficit in 2023 is projected at
RUB2.9 trillion, or 2% of GDP, cut to RUB1.26 trillion, or 0.7% of GDP, by
2025.

To remind, the NWF is projected at 3.7% of GDP in 2024, the lowest value for
the fund since 3.1% of GDP in 2004, when the predecessor of NWF, the
Stabilisation fund, was established. In nominal terms, the NWF will fall to its
lowest level since 2018, the year of transformation of the fund to its current
format.

As followed by bne IntelliNews, the NWF was merged with the Reserve Fund
in 2018 and is regulated by the so-called “budget rule” that caps federal budget
spendings and thus the fund allocations at cut-off oil price.

The budget rule was first compromised during the outbreak of COVID-19
pandemic and suspended in 2022 amid the Western sanctions for Russia’s
military invasion of Ukraine. While FinMin is redrafting the rule, there will be no
transfers to the NWF until the end of 2023.

President Putin signed the law on the federal budget for 2023 and the
planned period of 2024-2025, with the document posted on the official web
portal of legal information.

According to the law, Russia’s budget expenditures will total RUB29 trillion
($465.7bn) in 2023, RUB29.4 trillion ($472.1bn) in 2024, and RUB29.2 trillion
($468.9bn) in 2025. Revenues will stand at RUB26.1 trillion ($419.1bn) in
2023, RUB27.2 trillion ($436.8bn) in 2024, and RUB27.9 trillion ($448bn) in
2025.

The deficit in 2023 is projected at 2% of GDP (or around RUB3 trillion
($49.3bn)), with mainly borrowings planned to be used to cover it. Meanwhile,
it is expected that the budget deficit will gradually go down to 0.7% in 2025.

The draft budget is based on a baseline outlook on Russia’s socio-economic
development for 2023-2025, which suggests a gradual decline of the Urals oil
price from $80 per barrel in 2022 to $65 in 2025, the moderate weakening of
the ruble’s exchange rate from RUB68.1 to RUB72.2 per $1 and the return to
the targeted inflation level of 4% by the end of 2024 from 12.4% in 2022.

The baseline scenario assumes that the Russian economy will shift to recovery
growth in early 2023, whereas by the end of 2024 the majority of the main
indicators, including GDP, industrial production and fixed investment, will
surpass the pre-crisis level in comparable prices.

71 Russia OUTLOOK 2022 www.intellinews.com