Expensive oil played for Russia: the reasons for economic success in the first quarter were named

Experts appreciate the sharp decline in the federal budget deficit

The first quarter of this year turned out to be surprisingly successful for the Russian economy, judging by preliminary data from the Ministry of Finance. Thus, the federal treasury deficit amounted to only 607 billion rubles – almost 1.5 trillion rubles lower than the figure for January-March last year. The picture of income is also impressive: oil and gas, for example, increased by almost 80% – due to high prices in commodity markets and, accordingly, an increase in export revenue. But not all experts are ready to rejoice over this: some of them regard the results as a short-term rise, which will almost certainly be replaced by a decline in the second half of the year.

Total budget revenues increased to almost 8.72 trillion rubles (+53.5%), non-oil and gas revenues amounted to 5.79 trillion rubles (+43.2%), oil and gas revenues amounted to 2.93 trillion rubles. As Siluanov’s department notes, “the volume and trajectory of this part of the revenue indicate a significant excess of the dynamics laid down during the formation of the budget law.” As for expenses, their volume tentatively amounted to about 9.34 trillion rubles, which is 20.1% higher than the level of the first quarter of 2023. The indicator is also related to “prompt conclusion of contracts and advance payments for individual contracted expenses.”

It is appropriate to recall that at the end of last year, the federal treasury deficit exceeded 3.2 trillion rubles. Expenses amounted to 32.3 trillion, and income – 29.1 trillion rubles. This year, the budget law provides for a deficit of 1.59 trillion rubles, revenues are expected at 35.06 trillion, expenses – 36.66 trillion rubles.

In 2023, Russian oil and gas exports found themselves under “crossfire.” Sanctions have been tightened: in particular, an embargo on the supply of petroleum products by sea has come into force, and before that, in December 2022, on the transport of oil by sea. Restrictions also affected insurance, brokerage services and financing of transactions with oil sold above the ceiling of $60 per barrel. In a package of sanctions adopted in June, Brussels included a ban on entry into EU ports of any tankers that were transshipping oil from other vessels.

As a result, supplies of energy resources to Europe from the Russian Federation have collapsed compared to 2022, and demand for them from the slowing Chinese economy has also decreased. In general, according to the International Energy Agency, in the first half of 2023, global oil exports fell by more than one and a half times compared to the first half of 2022 – from $120 billion to $77 billion. Accordingly, Russia’s commodity revenues fell. In turn, the deterioration of the trade balance was one of the factors behind the weakening of the ruble last summer. As can be seen from the latest statistics from the Ministry of Finance, all these negative trends have been broken this year.

“The statistics from the Ministry of Finance for the first quarter look absolutely logical,” says Nikita Maslennikov, a leading expert at the Center for Political Technologies. – In January-February of this year, the volume of advance payments for individual contracts (advanced financing) was less than at the beginning of 2023. Accordingly, the budget deficit turned out to be smaller. The situation with oil and gas revenues is also clear: now Brent oil costs more than $90 per barrel, and a couple of months ago it was a little more than $70. Quotes are growing against the backdrop of geopolitical tensions and the escalation of the Iran-Israeli conflict. In addition, OPEC+ member countries confirmed their commitments to reduce production.”

But this is a very unstable factor, Maslennikov notes: prices cannot remain at this level indefinitely. Moreover, there is a slowdown in the global economy, which is especially evident in the example of China. And Russia is unlikely to achieve comparable results in terms of export revenues in the second half of 2024.

According to Alexey Vedev, director of the Center for Structural Research at RANEPA, the reason for the explosive dynamics of non-oil and gas income is not so obvious. This achievement (+43.2%) is hard to believe, but it is partly explained by data from the Ministry of Economic Development, according to which in February Russian GDP increased by 7.7% in annual terms. If this is true, non-oil and gas revenues will rise in proportion to economic growth.

“The downward trend in the state budget deficit is due to high oil prices,” says Oleg Kalmanovich, chief analyst at Neomarkets. – To prevent excess income from negatively affecting the economy and the ruble exchange rate, the Ministry of Finance is purchasing assets. Thus, the department decided: from April 5 to May 7, to double the volume of purchases of foreign currency and gold within the framework of the budget rule – in the amount of 11.2 billion per day. In March – early April, the potential negative effect was smoothed out by the Central Bank with the opposite action – sale. In any case, the country has established mechanisms to reduce the federal treasury deficit and fill the National Welfare Fund.”