Russia's 2023 budget deficit hits 1.9% of GDP after late spending jump

A 25% increase in non-oil and gas revenues in 2023 counteracted a 23.9% drop in energy revenues as Western sanctions, including an oil price cap and embargo, sought to deprive Moscow of funds to prosecute the war in Ukraine. That non-energy revenue rise also facilitated higher spending, including the usual jump in spending in December.

Russia recorded a budget deficit of 1.9% of gross domestic product (GDP) in 2023, the finance ministry said on Thursday, a slight improvement on 2022 but below the government's original target.

According to the ministry's preliminary estimate, the overall deficit stood at 3.24 trillion roubles ($36.5 billion), with total revenues increasing 4.7% year-on-year to 29.12 trillion roubles and spending climbing by 4% to 32.36 trillion roubles. A 25% increase in non-oil and gas revenues in 2023 counteracted a 23.9% drop in energy revenues as Western sanctions, including an oil price cap and embargo, sought to deprive Moscow of funds to prosecute the war in Ukraine.

That non-energy revenue rise also facilitated higher spending, including the usual jump in spending in December. The ministry spent more than 5 trillion roubles in December 2023, following on from a 7 trillion rouble splurge the year before. Russia has been funnelling ever more resources towards its military and the defence industry since its February 2022 invasion of Ukraine. Spending on defence and security combined is set to reach around 40% of all budget expenditure this year.

Heavy spending in early 2023 left many analysts predicting a huge budget deficit last year, but high oil prices and Russia's success in evading Western efforts to significantly curb its energy takings boosted Moscow's prospects. The drop in Russia's oil and gas revenues to 8.82 trillion roubles, from 11.59 trillion roubles, is still significant. The ministry said the decline was due to a high base in 2022, lower Urals prices in the early part of last year and reduced export volumes of natural gas. ($1 = 88.7225 roubles)