Putin reels as Russian monthly deficit nears £20bn
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Russia’s economy is approaching an eye-watering £20billion for the month of January – representing three-fifths of the shortfall previously planned for the entire year. And in a stark illustration of the serious damage Vladimir Putin’s war on Ukraine is having on his own country, Russia’s finance ministry today warned budget revenue in January was 35 percent lower compared with the same month in 2022, just before the Russian President ordered his invasion on February 24.
The figures were described by one economist as “disastrous” – and a clear sign that “budgetary risks” were increasing.
The ministry also said the deficit for January was 1.77 trillion rubles (£19.87 billion), roughly 60 percent of the shortfall anticipated for the whole 12-month period.
Oil and gas revenue, the backbone of Russia’s economy, was down 46 percent compared with January 2022, currently standing at 426 billion rubles.
Natalia Lavrova, chief economist at BCS Global Markets, told the Financial Times: “The only time we saw something similar was in 2015, when spending on national defence increased sharply.
“However, the huge difference between 2015 and 2023 is that back then, the revenues dynamics was not as disastrous.”
The only comparable fall in tax revenues on record occurred during the first wave of the COVID-19 pandemic three years ago, Ms Lavrova explained.
She added: “It is obvious that budgetary risks are increasing: both on the spending and revenue sides.”
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Western countries have declared a $60-per-barrel price cap on Russian crude oil as well as ceilings on refined oil products like diesel fuel and gasoline.
Russia has said it will sell oil to countries observing the limit, but the cap and falling demand from a slowing global economy has meant customers in China, India and elsewhere are able to buy Russian oil at steep discounts, cutting into the Kremlin’s revenue.
The country also has been hit with a range of Western sanctions since the beginning of the war, while many Western companies have stopped doing business in Russia.
The figures are broadly in line with projections by Vladyslav Vlasiuk when he spoke to Express.co.uk in October about the possible impact of western sanctions.
Economist Mr Vlasiuk, who works for the Office of the President of Ukraine, said within six months, Moscow was facing the prospect of a disastrous 60 percent drop in gas and oil revenue.
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He said: “We see it from the state report in Russia, they had to cut the expenditure from the government by 10 percent at least, which signals that there is some impact from the sanctions.
“Also this year the government has raised the cost of utility bills for average Russians twice. The first time it was in July by six percent and now nine percent.
“So we see the hypocrisy of their Russian propaganda – they always say ‘you guys in Europe, your sanctions are harmful to yourself, you had to increase your utility bills because of sanctions’, but now they’re doing the same exactly because of the sanctions.”
He continued: “The basis is that sanctions, especially the price-capping of oil, will cut Russia’s oil and gas revenues.
“It goes as it is planned we believe that starting February next year, Russia will have 60 percent less oil revenues for its budget, which will make a real difference.”
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