Page 89 - Russia OUTLOOK 2024

new realities: the main change was to drop the Urals blend price as the benchmark for charging oil and gas taxes and switch to using the Brent benchmark minus a discount. The result was that the budget went back in profit in May 2023 and revenues recovered in the second half of the year, much to everyone’s surprise.
Siluanov will persist with his financial re-engineering of the tax system in 2024 to continue to reshape the tax system to fund the war. In 2023 military spending was 6% of GDP, which is high but not excessive and easily within the ability of MinFin to fund.
The main threat to tax revenues in 2024 is the falling labour productivity and sinking profits in most industries outside the defence sector, as well as the imbalances in fiscal policy. Overheating will oblige the Central Bank to maintain high interest rates, dampening economic activity and reduce the tax take. But again this is unlikely to be extreme.
“Even if the war ends next year, it will be a Herculean task to get the economy back on a civilian footing. The more Russia is hooked on “military steroids,” the more painful the hangover. Unlike the 1980s, there will be no financial help from the West. Yet, paradoxically, despite all the difficulties ahead, there are no major threats to the economy in 2024. Of course, future generations will pay a heavy price for the current state of affairs – but this is the last thing on the Kremlin’s mind,” says Prokopenko.
89 Russia OUTLOOK 2024 www.intellinews.com