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supporting local economies, and mobilisation.
“To put this into perspective, during the pandemic in 2020, when most regions faced a significant drop in economic activity for extended periods, the consolidated deficit was RUB677bn ($10.5bn), BMB analyst Andras Toth-Czifra wrote. “Consider also that most regions started the year on a positive note, increasing their revenue over 2021.” As of October, only 18 regions (of a total of 83 plus two occupied territories in Ukraine) were in deficit. The situation is worse in coal-producing and metallurgical regions. While overall the CBR report describes the economic situation as a mixed bag, it notes a couple of key problems: the reduction of investments in Central Russia and in the Urals and transit bottlenecks in the East, both on rail and in seaports.
The federal budget may increase transfers to regions if needed, but the situation will remain difficult. For 2023, the CBR anticipates a consolidated deficit of RUB1.4 trillion.
Regions as a whole will be reducing their expenses by 3.1%, even though the pressure on regional budgets to prop up the finances of citizens and local economies will not ease. This may lead to increased friction between interest groups that court public money, but also to cuts in expenses associated with weaker players. In the Arkhangelsk Region, for instance, local authorities are proposing cutting a number of social obligations to replenish the region’s reserve fund. Meanwhile, Chuvashia seems to have run out of funds to support families with children after the regional budget allocated RUB400mn ($6mn) to supporting draftees’ families.
Regions will also continue to face uncertainties regarding their revenue streams, as the outlook for export-oriented industries remains negative. Coal production in the Kemerovo Region, for instance, has fallen by 10% this year, despite significant demand before August (when EU sanctions entered into force). Furthermore, the planned expansion of railway links to Asia aiming to increase throughput will likely suffer further delays.
80 RUSSIA Country Report February 2023 www.intellinews.com