Page 36 - RusRPTMar23

2.10 Russia's budget deficit widens as oil prices fall and military spending rises
Russia's budget deficit has increased significantly in recent months and is likely to remain under pressure due to lower oil prices and higher military spending, Capital Economics said in a note on February 22.
Although the government is not expected to face severe fiscal strains this year, the country's public finances are on a downward trajectory, and wider budget deficits may lead to further interest rate hikes that could potentially crowd out the private sector.
The latest data shows that oil and gas tax revenues slumped by 46% Y/y in January to $6bn. Part of the fall was due to changes in the timing of tax collection, which will be resolved over time. However, lower crude and natural gas prices are taking their toll. Meanwhile, government spending unexpectedly surged by 55% Y/y in the three months to January, its highest rate since 2007.
All of this has resulted in a 2.5% increase in the budget deficit as a percentage of GDP in the last three months. The deficit currently stands at 3.4% of GDP on a 12-month basis, which is only slightly smaller than during the pandemic. (chart)
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Banks appear to have become less willing to buy new debt. The Finance Ministry issued a record amount of ruble debt in the fourth quarter of 2022, with
36 RUSSIA Country Report March 2023 www.intellinews.com