Russian macro: drafting the budget for 2023 and beyond
As Russia continues its journey to an unknown future, while the country’s economy has to undergo a kind of counter-transformation, i.e., from an open-market-oriented version toward a more closed one, the government has started to shape the 2023-2025 rolling budget. Such planning assumes a baseline scenario of the country’s economic development in the years to come. The current government’s (in fact, Economics Ministry’s) thinking is not unreasonable and, as opposed to the dominant views at the start of Russia’s “special military operation,” the economic recession is now expected not to be as deep in 2022 as was thought a few months ago, but more prolonged. The government’s baseline scenario expects GDP contraction by 7.8% in 2022 and by 0.7% in 2023. Investment in production capacity is expected to contract 19.4% this year.
The budget’s total 4M22 revenues exceeded 40% of the annual plan as the government collected already over 50% of the targeted oil-and-gas revenues. It won’t be a problem for the government to execute the potentially amended budget in 2022. The 2023 budget will probably not look too different from the potentially amended 2022 budget – the structure is likely to remain the same, only the nominal numbers will be higher. Most likely, the government will target budget deficits near zero going forward. As no FX intervention can be expected, the macroeconomic environment will be less distorted.
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