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(Bloomberg) — Russia’s huge budget deficit eased as spending slowed in March, even as the war in Ukraine continued to hamper government revenue.
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The budget deficit fell 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 released by the Finance Ministry on Friday showed. The ministry said spending growth slowed to 4.2% in March after increasing by about 50% in February due to a spending acceleration at the start of the year.
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Non-energy revenue rose for a second straight month after slumping in January.
According to estimates by Bloomberg Economics, the increase in Russian spending at the beginning of the year was mainly due to the cost of the war.
The deficit compares to a surplus of 1.1 trillion rubles in the first quarter of 2022, a sign of the impact on the budget of the invasion ordered by President Vladimir Putin last February. Oil and gas income fell 45% in the first quarter from 2022 as the European Union turned away from Russia’s energy supplies and the Group of Seven countries imposed price ceilings on Moscow’s oil sales. .
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What Bloomberg Economics Says…
Russia’s budget deficit will be larger than the government’s target of 2% of GDP, but is unlikely to reach more than 3% by 2023. Oil and gas revenues should recover in the coming months thanks to a weaker ruble and the government pushed to limit the discount for the Urals to Brent, which producers use when calculating their taxes.
—Alexander Isakov, Russian economist.
The Treasury Department has repeatedly assured it is on track to keep the budget deficit for 2023 within its target range and has blamed overspending on spending spikes at the start of the year.
The ministry said on Friday that the new tax regulation and the gradual reduction of the discount on Russian Urals crude oil will help earnings recover.
