Russia’s federal budget deficit will reach 2% of GDP this year, Finance Minister Anton Siluanov said.
Running a deficit is not so uncommon in the modern Russian history, Fyodor Sidorov, private investor and founder of the School of Practical Investment says.
The last times Russia posted a budget deficit were 2009 (RUR2.3), 2010 (RUR1.8 tln), 2014-2017 (the deficit ranged from RUR300 bln/$4.6 bln to RUR2.9 tln/$44.7 bln), and 2020 (RUR4.1 tln/$63.2 bln). Admittedly, Russia’s GDP has been growing over time: from RUR 38 trn in 2009 to RUR131 trn in 2021. At the end of this year, Russia’s GDP is projected to reach RUR 120 trn ($1.85 trn). That is, if we take absolute figures, the picture does not seem catastrophic and even looks quite routine, the expert explained to Invest Foresight.
“The problem is that the recession in Russia will have a long-term effect. It may take several years for GDP to regain its 2021 level. And negative trends will grow during this time – the delayed effect of sanctions, the contraction of exports and decline in imports, the shrinking consumer demand, etc. Therefore, we can expect the budget deficit to increase next year, meaning the government will be short of funds to finance some of its expenditures. These may include salaries of state employees, social benefits, education, medicine and culture, pensions, and more. These items may have to be defunded,” Fyodor Sidorov warns.