Russia - Budget plans must be drastically revised The Duma and Federation Council have approved the budget framework for the 2015-2017 period. However, a look at the economic numbers envisaged even for 2015 shows that this document is already well out of date. As OPEC meets today to consider whether or not to restrict supply after the sharp fall in oil in H2 the Russian Finance Minister has admitted that oil prices may remain at these levels (around US$80 for Brent) for some time. Compare that with the $96 assumed in the budget for 2015. The outlines of the budget were necessarily drawn up some time ago. As we know oil accounts for about half of Russias fiscal revenues this clearly dramatically alters the picture. The budget also assumed the ruble would average 37.7 to the US$ (now over 46). The inflation (5.5%) and real GDP growth assumptions (1.2%) also seem now wildly optimistic as a result both of oil price developments and the implementation of sanctions/counter-sanctions. The cash deficit was targeted at 0.6% of GDP and the non-oil deficit at 9.7% of GDP. Spending will have to be cut back sharply (on the basis of much lower revenues) if these deficit targets are to be observed or else they will have to be relaxed somewhat. Moreover, the Reserve Fund will also be drawn down much further than planned given the difficulties Russian state-owned firms are now having accessing the capital markets.
Posted on: Thu, 27 Nov 2014 09:34:44 +0000
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