Russia’s huge budget deficit shrank as spending slowed in March, even as the war in Ukraine continued to hammer the government’s revenue.
(Bloomberg) — Russia’s huge budget deficit shrank as spending slowed in March, even as the war in Ukraine continued to hammer the government’s revenue.
The fiscal shortfall decreased to 2.4 trillion rubles ($29.4 billion) at the end of March from 2.58 trillion in the first two months of the year, data published Friday by the Finance Ministry showed. Spending growth slowed to 4.2% in March after surging by about 50% in February as a result of accelerated expenditures early in the year, the ministry said.
Non-energy revenues increased for the second month in a row after a collapse in January.
A surge in Russia’s expenditures in the beginning of the year was driven mainly by war costs, Bloomberg Economics estimates showed.
The deficit compares to a surplus of 1.1 trillion rubles in the first quarter of 2022, an indication of the impact on the budget of the invasion ordered by President Vladimir Putin in February last year. Oil and gas income was down 45% over the first quarter compared to 2022 as the European Union turned away from Russian energy supplies and the Group of Seven nations imposed a price cap on Moscow’s oil sales.
What Bloomberg Economics Says…
Russia’s budget deficit will be wider than the government planned 2% of GDP, but is unlikely to reach more than 3% in 2023. Oil and gas revenue will recover in the coming months on the back of a weaker ruble and the government’s push to limit the discount for Urals vs. Brent, which producers use when calculating their taxes.
—Alexander Isakov, Russia economist.
The Finance Ministry has repeatedly assured that it’s on track to keep the budget shortfall for 2023 within the target and has blamed heavily front-loaded spending for the jump in expenditures early in the year.
New tax regulation and a gradual decrease in the discount of Russia’s Urals crude should lead to recovery in incomes, the ministry said Friday.
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