Home Commodities Russia’s budget surplus is evaporating as energy revenues decline

Russia’s budget surplus is evaporating as energy revenues decline

by SuperiorInvest

Russia’s budget surplus for 2022 has all but evaporated after a sharp drop in energy exports in August led to a monthly deficit of up to Rbs 360 billion ($5.9 billion).

Russia recorded a surplus of almost Rbs 500 billion in the first seven months of the year. But the cumulative total fell to just Rbs 137 billion last month, suggesting a large deficit in August that economists attribute to a sharp drop in oil and gas revenues. Russia’s surplus hit Rb1.37 trillion in the first six months of the year as it built up a war chest on the back of soaring energy prices.

Russian gas flows to Europe have shrunk to roughly a fifth of pre-invasion supplies. In early September, it said it would keep Nord Stream 1, which runs under the Baltic Sea to Germany, closed indefinitely unless the West lifted sanctions imposed on Moscow’s invasion of Ukraine.

The sharp deterioration in Russia’s state finances comes as its army has been defeated in northeastern Ukraine in its biggest military setback since a losing battle for the capital Kyiv in March.

Revenues from oil and natural gas, which make up almost half of the budget revenue received so far this year, fell by 18 percent year-on-year, according to data from January to August.

The EU has also banned imports of Russian coal. The EU’s ban on Russian oil imports is set to come into effect in December.

Russia initially showed resilience in overcoming the impact of repressive measures, including freezing to half of its foreign exchange reserves.

But Russia’s state gas monopoly Gazprom said earlier this month that output in the first eight months of the year fell by 15 percent year-on-year. Exports, which flow mainly to Europe, fell by more than a third.

Sales are likely to worsen after Russia suspended Nord Stream 1, one of its main gas pipelines to Europe, in early September.

Russia’s economy shrank by 4.3 percent in July 2022 compared to the same month a year earlier, the country’s economy ministry said. Analysts at Russian brokerage Aton expect the economy to shrink another 5 percent in 2023 due to declining energy production.

The Russian Central Bank expressed caution regarding the economic outlook and message published last week on the regional economy, saying exports were likely to fall.

The central bank is due to meet on Friday to decide on interest rates.

Monetary policymakers raised rates to a record 20 percent and imposed capital controls to quell the attack on the ruble in the days that followed the outbreak of war. Borrowing costs have gradually decreased since then and now stand at 8 percent.

Source Link

Related Posts

%d bloggers like this: