Page 80 - RusRPTJan23

6.1.1 Budget dynamics - results
Russia’s federal budget deficit will total around 2% of GDP in 2022,
Finance Minister Anton Siluanov said on December 8. At the end of September, the Finance Ministry estimated Russia’s federal budget deficit in 2022 at around 0.9% of GDP.
The price of Urals crude – Russia’s main oil blend – fell to $55pb in December from $75pb in August and $100pb in March. This has reduced a key source of income for Russia’s economy but there is often a lot of confusion about whether to focus on the impact of this on the budget or current account positions.
“The distinction between the two is important. We estimate that Russia needs an oil price of about $110pb to balance the budget, but an oil price as low as $25pb to balance the current account. This gap reflects the fact that while higher government expenditure and the strong have pushed the budget into a deficit (of 1% of GDP), depressed imports due to sanctions and high oil and gas prices have generated a massive private sector surplus and boosted the current account balance (to +13% of GDP), says Oxford Economics.
“The budget will clearly stay in a large deficit low oil prices, but the budget on its own doesn’t tell us the whole story of Russia’s ability to withstand low oil prices or sanctions, in part because a deficit can be funded domestically. This is exactly what Russia is doing. The government is financing the deficit by running down assets in the National Wealth Fund (NWF) – a fund where excess oil and gas tax revenues have been stored in recent years. More recently, the government has returned to the bond market and issued
80 RUSSIA Country Report January 2023 www.intellinews.com