On Breakingviews: Economic asphyxiation puts Russia in China’s orbit, writes pierrebri
Russia’s fiscal deficit stood last year at 2.3% of GDP, according to official numbers. The government forecast for 2023 is for a reduction to 2% of GDP, which would put the state’s financing needs at some $40 billion.
According to estimates from the Institute of International Finance, each $10 movement in the price of a barrel is worth $15 billion a year to the state budget. So, in the first two months of 2023, the government has already lost $5 billion. According to Russian economist Alex Isakov, the budget deficit this year could even
Barring spending cuts, the government has three ways to fund its budget needs. The first is to issue bonds that the country’s banks refinance at the central bank. That would fuel inflation. The, with interest rates at 7.5%, has a 4% inflation target that it missed last year, when prices jumped 12%. It has estimated that inflation will run at around 7% this year. Its indirect financing of the budget deficit increases the inflationary pressure it wants to suppress.
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