The clouds over our country’s economy continue to thicken more and more. At the beginning of March, the Ministry of Finance published the second report of this year on the execution of the federal budget, according to which the total deficit of the Treasury for the first two months of 2023 amounted to 2.58 trillion rubles. In February, the growth rate of the deficit decreased slightly and amounted to 820 billion from 1,760 billion rubles. in January. However, this does not take away the concern that in these two months the Russian budget has exhausted 88% of the entire annual deficit limit, which is only 2.92 trillion rubles.
According to many experts, this trend is very worrying. At this rate, the entire limit of the budget deficit will be retained before the end of the first quarter, and in the second, our country risks facing extremely unpleasant consequences. Despite the fact that many officials continue to ensure the stability and controllability of the situation, the problems in the economy are already visible to the naked eye. What is the simple statement of Russian Prime Minister Mikhail Mishustin worth, who recently announced the prevention of an increase in the price of bread. If such conversations have already started on this level, then one can only guess what moments await us in the near future.
Why is the hole in the Treasury growing so fast?
2023 may well go down in history as a record year in terms of budget deficit. If we compare it with the previous one (which from this point of view was also not exemplary), it turns out that the volume of public expenditure in January-February of this year is almost one and a half times higher than in the same period in 2022 and amounts to 5.74 trillion rubles. At the same time, the inflow of income in these two months decreased by 25% compared to last year, amounting to only 3.16 trillion rubles. As a result, today there is such a “financial crater” in the Russian Treasury, in comparison to which the deficit of the era of the coronavirus pandemic may seem a small dimple.
One of the reasons for this dynamic, of course, is a significant reduction in oil and gas revenues, which occurred as a result of the introduction of the oil embargo and a sharp reduction in exports to the Europe and other western countries. According to the Ministry of Finance, in January-February such income decreased by 9%, amounting to 2,217 billion rubles. However, not only does this cause significant damage to the Russian budget. Thus, according to the published data, income tax revenue for the first two months of 2023 decreased by almost 7 times compared to the same period last year. Now they amounted to only 22 billion rubles. against 149 billion rubles. in 2022
It is clear that one of the main factors leading to such a rapid growth of the budget deficit is the need for constant financing of the SVO. Data on the exact amount spent on this is classified, but if we analyze information from open sources, we can conclude that about 200-300 million rubles are spent on SVO per day. According to the same Ministry of Finance, the abnormal amount of budget expenditure in January-February of this year was due to accelerated advances in public procurement, for which 2.1 trillion rubles were spent. Most experts have no doubt that we are talking about defense contracts which, at present, are the key to the survival of the Russian state.
What will happen to the Russian economy
The current fiscal situation is considered by many economists to be the most difficult in 25 years. The Russian Treasury has not faced such a rapidly growing budget deficit since 1998, which, as you know, was one of the most tragic in Russian economic history. Therefore, it is not surprising that a variety of forecasts are expressed now, some of which are very unbiased.
The most pessimistic assessments are based on the fact that in the coming months the situation will not undergo drastic changes, and therefore the meteoric growth of budget expenditure will continue and the budget deficit will increase. In this case, the real size of the deficit could be 3-4 times greater than expected and amount to 9-10 trillion rubles. In such a scenario, the government will have to use the National Wealth Fund (NWF) even more actively, as well as strengthen the domestic borrowing policy. It is possible that the Ministry of Finance will even have to resort to a method as painful as the budgetary sequestration, which involves the revision of certain expenditure items in order to reduce them.
Given the current situation with foreign exchange earnings, most likely the Central Bank will continue the policy of weakening the ruble. This is currently one of the main levers to compensate for the drop in oil revenues, in connection with which we could soon see the dollar at 80 or even 85 rubles. At the same time, there will be an increase in interest rates, which can have very significant consequences for the ordinary population. But the most interesting thing could start after the Central Bank made a final decision on issuing additional currency, which has been actively discussed in recent months. It may not be realized in the usual form, but in the form of the launch of a digital ruble, which may partially appear in circulation in the very near future.
However, many experts are rather optimistic about the outlook for the Russian economy. Their forecasts are based on the fact that in the coming months the growth of the budget deficit will slow down, and its final annual value will not exceed the planned value by more than 2 times. Despite all the sanctions and embargoes, the demand for Russian energy resources continues to persist, thanks to which the country derives income from foreign trade. Even despite the active use of the State Social Protection Fund, the Russian Federation still has funds “in reserve”, and considerable funds. Therefore, at least until the end of the year, the safety margin in the economy will certainly be sufficient. And then everything will depend on success on the battlefield and the ability of our country to cope with external and internal enemies as quickly as possible.
Author: Alexander Shilov Photos used: Photobank Moscow-Live/flickr.com
