Russia is set to face another huge budget deficit in 2024 due to record military spending as the war President Vladimir Putin started in Ukraine continues to mount.
Russia’s overall deficit exceeded 3 trillion rubles ($30 billion) for the third year in a row, with revenues rising by more than a quarter, while spending rose by the same amount, according to Russian Finance Ministry statistics.
Newsweek has contacted Russia’s Ministry of Finance for comment.
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why is it important
Since President Vladimir Putin’s full-scale invasion of Ukraine, Russia has redirected its economy towards war operations through the development of its military industry. But sanctions, high inflation and labor shortages are hurting the economy and raising questions about the sustainability of Putin’s military spending plans.
What you need to know
According to the country’s Ministry of Finance, Russia will record a budget deficit of more than 3 trillion rubles for the third consecutive year in 2024, soaring to 3.49 trillion rubles ($34.39 billion).
Revenues increased by 26% to 36.71 trillion rubles ($368 billion), while expenditures rose by almost the same amount (24.2%) to 40.19 trillion rubles ($403 billion).
Russia’s Ministry of Finance said additional oil and gas revenues boosted year-end spending, but some of the funding was intended to prepay spending in 2025, state news agency Interfax reported. Ta.
According to Reuters, Russia’s deficit as a percentage of gross domestic product (GDP) has decreased from 1.9% to 1.7%, which is higher than the ministry’s target of 0.9% of GDP. .
The agency noted that Russia’s deficit widened to 7.3% of GDP (7% of GDP in 2023), excluding revenues from its main exports, oil and gas.
Social media users pointed out that Treasury statistics show Russia is struggling to survive the cost of the war.
However, Grzegorz Drozdz, a market analyst at Invest.Conotoxia.com, told Newsweek magazine that Russia’s public debt stands at 19.5%, which is much better than the European average.
According to the EU’s statistical service Eurostat, European Union (EU) government debt accounted for 81.5% of the region’s nominal GDP as of June 2024.
Droz said Russia’s economy has shown resilience despite heavy spending on armaments and the war in Ukraine, and that higher tax revenues will reduce the deficit to 0.5% of gross domestic product. He also said that despite international sanctions, Russia’s GDP is expected to grow by 1.4% annually.
what people are saying
“The budget of the Russian Federation for 2024 was implemented with a deficit of 3.485 trillion rubles, or 1.7% of GDP,” the Russian Ministry of Finance said on Interfax.
“This is Russia’s second largest budget deficit since 2020, when the coronavirus pandemic and economic turmoil began,” geopolitical analyst Alexander Kokcharov said of X.
Grzegorz Drozdz, a market analyst at Invest.Conotoxia.com, told Newsweek that “despite huge spending on armaments and the war in Ukraine, Russia’s economy continues to show resilience.”
what happens next
Russia’s defense spending will increase rapidly from now until 2027, by which time it will account for at least 40% of the budget.
This year, Russia plans to spend 13.5 trillion rubles ($135 billion) on its military, nearly a third more than in 2024, with similar amounts planned for 2026 and 2027. .
