The Russian Ministry of Finance has sharply raised its budget deficit forecast due to falling oil revenues
1 May 22:05
The Ministry of Finance of the Russian Federation has released significantly adjusted budget figures for 2025, increasing the projected deficit to 1.7% of gross domestic product (GDP) instead of the previously planned 0.5%. According to a Reuters article, the reason for this step was a sharp decline in the forecast of oil and gas revenues by 24% due to expectations of a prolonged period of low oil prices, "Komersant Ukrainian" reports.
According to the ministry’s new calculations, oil and gas revenues in 2025 will amount to only 8.32 trillion rubles (approximately $101.47 billion) or 3.7% of GDP, while the previous forecast was 10.94 trillion rubles or 5.1% of GDP. At the same time, it was announced that the expenditure side of the budget would increase by 830 billion rubles.
It is worth noting that Russia has already increased defense spending by a quarter in 2025 to a record 6.3% of GDP, the highest level since the Cold War.
Finance Minister Anton Siluanov assured that military spending would not be reduced:
“The budget priorities remain unchanged. These are social support for citizens, financing of defense and security of the state, support for families of participants of the special military operation.”
It is noteworthy that the announcement of the budget changes came on the eve of the long May holidays, when most Russians are traveling out of town and are unlikely to pay attention to such news. The new deficit forecast exceeded analysts’ expectations, who had predicted a rise of no more than 1.5% of GDP.
Читайте нас у Telegram: головні новини коротко
Tax challenges and balancing the budget
Many experts believe that in the future, the Russian government will have no choice but to raise taxes, cut some social expenditures and increase borrowing if it intends to balance future budgets without reducing defense spending.
Already this year, Russia has raised several key taxes, including the socially sensitive personal income tax and corporate income tax. It is worth noting that Putin considers balanced budgets, low debt levels and moderate taxes to be his key achievements in his 25 years in power.
Escalation of trade wars
Stable public finances have helped Russia withstand global crises in the past, but the risks of global turbulence this year are being exacerbated by the rising costs of the war in Ukraine and Western sanctions.
The slowdown in the global economy as a result of trade wars is negatively affecting demand for oil and driving down its price – in April alone, the price of oil fell by more than 11%.
The announcement by the Ministry of Finance came after the revision of the average oil price used in the 2025 budget calculations to $56 per barrel instead of the previous $69.70. However, Siluanov insists that spending plans will not be affected:
“Everything planned in the budget, including the implementation of national development goals, will be fulfilled regardless of external conditions and factors.”
The Russian Ministry of Economy has also published its high-risk forecasts for the first time, noting that international trade wars triggered by the United States’ protectionist policy pose a key risk to the Russian economy.
According to this scenario, economic growth in Russia is expected to reach only 1.8% in 2025, compared to 2.5% in the baseline scenario, which most economists consider too optimistic. Last year, the Russian economy grew by 4.3%.
“The scenario assumes an escalation of trade wars and a significant slowdown in the global economy, which will reduce global demand and prices for oil and other traditional Russian exports,”
– the Ministry of Economy noted.
Siluanov also intends to keep more oil revenues in the reserve fund and create a “safety cushion” during the period of global turbulence by lowering the so-called “cut-off” oil price, above which all energy revenues are set aside for a “rainy day.”
Читайте нас у Telegram: головні новини коротко
