Page 86 - RusRPTApr24

day fund, which still holds RUB4.8 trillion – more than enough to cover a deficit of only RUB1.6 trillion for several more years.
Even if the deficit blows out to similar levels as last year of RUB3.4 trillion – more than the originally forecast RUB2.9 trillion, but still only 2% of GDP thanks to that strong economic growth – then the NWF would still cover the deficit for another year and half.
Spending and growth in 2024
Last year was made easier for MinFin by the unexpected strong growth that caught even the Kremlin by surprise. However, it is unlikely to have the same luck again.
That growth was helped by the military Keynesianism effect of heavy spending on military production, but now Russia’s factories are already running three shifts a day 24/7 that economic growth has probably already hit its ceiling.
Russia’s industrial capacity utilisation is already at an all-time high of 81% and there are simply no more production lines that can be easily put into operation nor, with so many men on the front line, are there any spare workers to operate them if there were – a second constraint on more growth.
The Central Bank of Russia (CBR) said in its monthly macroeconomic forecast survey for March that GDP growth this year will be 1.8%.
“Analysts have improved the GDP forecast for 2024 to +1.8% (+0.2 p.p.). The forecasts for the following years and the estimate of the long-term GDP growth rate are unchanged at +1.5% per annum,” the CBR said.
Central Bank of Russia monthly macro survey – GDP growth in 2024
The international financial institutions (IFIs) are more pessimistic. IMF recently lowered its forecast to 1.1% – although last year showed that predicting Russia’s growth has become extremely difficult, as everyone missed the target in 2023.
Persistent high inflation will be a significant drag on growth and has already forced the CBR to hike interest rates to 16% – a growth-crushingly high rate. Spending is also a concern. Revenues grew in the first two months of this year, but spending, up 17% y/y, grew faster. Tax revenues of Russia’s budget system are expected at RUB52.5 trillion ($571bn) in 2024, which is 12% higher than in 2023, according to head of the Federal Tax Service Daniil Egorov, but that 12% gain doesn’t give the MinFin that much leeway to cope with oil price falls or unexpected increased war costs.
86 RUSSIA Country Report April 2024 www.intellinews.com