Russia's budget deficit is not a problem

Now everywhere is the Western press there are the doom monegers telling you about Russia's economic collapse,in fact if I got $5 dollars for every article I read predicting its collapse over the last 3 years I would be very rich indeed.
Now the Real situation in the Russian is economy is its balance and in the first quarter it will show a slight deficit but certainly nothing to worry about compared with the calamities that are occuring in the economies of the countries of the G7 and the EU. Particularly places like Germany and Great Britian who are serious economic basket cases .
Now according to the preliminary estimate of the Russian Ministry of Finance for the first quarter of 2025, the federal budget deficit amounted to 2.17 trillion rubles.( this is a round $19 billion at todays exchange rate)
This figure represents a decrease of 1.88 trillion rubles compared to the same period in 2024. The Izvestia article provides an analysis of the factors contributing to the deficit reduction, the evolution of budgetary policy, and the outlook for the remainder of the year.

According to the Ministry of Finance's preliminary estimate, federal budget revenues in Q1 2025 reached 9.50 trillion rubles, marking a 3.8% increase compared to Q1 2024. The Ministry of Finance has also reported that the volume of federal budget expenditures at the end of the reporting period increased by 24.5% and amounted to 11.22 trillion rubles.

The Ministry has explained that the current level of the budget deficit is mainly due to advanced financing of expenditures in January 2025 and will not affect the implementation of the target parameters of the structural balance for 2025 as a whole.
At the same time, in March of this year the federal budget was in surplus, according to the Ministry of Finance.
Analysts consider the slowdown in spending growth (the lion's share of which occurred at the beginning of the year due to the accelerated advance payment of government spending in January-February) to be a positive factor.

In March, the growth of expenditure slowed by 11.2% year-on-year (RUB 3,179 billion) after extreme growth rates at the beginning of the year, and the budget for the month was in surplus, which ultimately had a positive impact on the final result of the first quarter. This is despite the fact that in January-February, the federal budget of Russia was executed with a deficit of RUB 3,841 billion, as pointed out by Olga Veretennikova, vice president of the analytical company Borsell.

She emphasises that Russia unlike most other countries does not rely on credit to fund its operations. The budget deficit stands at 1% of GDP, with the first month of spring seeing a surplus. The total volume of tax revenues to the country's budget continues to grow steadily, according to Andrey Loboda, economist and director of communications at BitRiver.

The revenues from non-oil and gas sources to the Russian budget increased by 10.6% in the first quarter of 2025 compared to the same period last year, reaching 6.4 trillion rubles. The Ministry of Finance has clarified that this figure is slightly higher than the planned level, indicating a stable foundation for continued and accelerated growth in revenues.
The growth in non-oil and gas revenues can be attributed to the increase in revenues from turnover taxes (including VAT), which in the first quarter amounted to 9.4% compared to the same period last year.
The sustained high inflation contributes to the growth of such deductions, as does business activity, as well as the introduction of new fees and an increase in the rates of the current ones.
Specifically, the anticipated budget revenues from the tax reform, implemented last year and effective as of January 1 of this year, are estimated at 2.6 trillion rubles, as outlined by Artur Meinhard, Head of Global Markets at the Fontvielle Investment Company.
The manufacturing industry has been a significant contributor to the growth of non-resource revenues, driven by an increase in production in the sectors of mechanical engineering, the chemicals industry and metallurgy, supported by import substitution and state incentives.
The agriculture sector has also played a role, with an increase in exports of grain, meat and dairy products, along with growth in domestic demand. The IT sector and services have experienced an expansion in digital services, telecommunications and IT exports, including software and outsourcing.
Oil and gas budget revenues for the first quarter decreased by 9.8%, to 2.64 trillion rubles, mainly due to a one-time payment of additional mineral extraction tax on oil in February 2024, as well as a decrease in the average price of oil, according to the Ministry of Finance.

The budget for 2025 was prepared based on the average export price of oil at $69.7 per barrel and a ruble to dollar exchange rate of 96.5.
However, the beginning of the year has been marked by a significant strengthening of the national currency and a storm on the raw materials markets against the backdrop of a possible tariff war between major geopolitical players and an increase in production by OPEC+ countries. These developments are exerting pressure on the state's oil and gas revenues, which are contingent on these two parameters, as Arthur Meinhard explains.
As has been acknowledged by the Ministry of Finance, there is a risk of a reduction in oil and gas revenues due to falling prices remains.
In addition to tariff wars, oil is also under pressure from slowing global demand, the EU and Asia's transition to renewable energy sources, and rising production in the US and OPEC+ countries.

Sanctions pressure continues in the form of restrictions on the export of Russian energy resources and logistical difficulties in terms of transportation to Asia. Secondary sanctions from the US may also have a negative impact on the dynamics of Russia's oil and gas revenues, adds Olga Veretennikova.
However, as the Finance Ministry has highlighted, the budget rule currently in effect in Russia guarantees the stability of the budget system, regardless of fluctuations in oil and gas revenues. In accordance with this rule, during periods of favourable price conditions, additional oil and gas revenues are transferred to the National Welfare Fund (NWF). During unfavorable periods, NWF funds are used to cover lost revenues from oil and gas.
Non-oil and gas revenues remain stable and support the Russian budget. It is also important to note the financial safety cushion provided by the National Welfare Fund, established to mitigate potential shocks in the raw materials market.
As of March 1, 2025, the liquid part of the fund stood at 3.4 trillion rubles, as highlighted by Andrey Loboda.
Analysts have highlighted that changes in budget policy have contributed to the reduction of the deficit, with the emphasis shifting to national projects in areas such as defence, technology, education and healthcare.
In addition, the regions are being held to account through requirements for the subjects of the Russian Federation to reduce the debt burden and increase the efficiency of spending.
In addition, private investment is being stimulated in the form of benefits for companies participating in import substitution and export of non-raw materials. The positive dynamics of the budget deficit has a restraining effect on inflation: a reduction in the deficit reduces pressure on the money supply and limits the rate of inflation.
At present, expenses are 2.2% higher than the annual plan at 41.470 trillion rubles, while revenues, conversely, are 8% lower than the plan. Analysts are monitoring the situation closely, and a negative scenario remains a possibility.
In the context of relatively low oil prices, increasing government spending and a stronger ruble, Russia's budget deficit could reach 3% of GDP by the end of this year. At the same time, it is important that inflation does not increase in the context of the expected commencement of the key rate cycle in the second half of the year, as Andrey Loboda notes.
However, the analyst emphasises that the total volume of tax revenues to the country's budget continues to grow steadily. With a softening of monetary policy and a balanced market situation in the global geo-economy, there is a high probability that the country's budget will soon become surplus.
So there you have it, Russia despite what the Western media predicts every week is still in good shape