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CEPA: Oil Hits The Russian Economy

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CEPA: Oil Hits The Russian Economy

Businesses and citizens will have to pay for it.

Russia's budget is suffering from a deficit: in May, it increased by Br200 billion and reached Br3.4 trillion (1.5% of GDP), according to the Ministry of Finance. The main reason is the fall in oil revenues. In May, they fell by 35% compared to the same period last year, writes the Cepa edition (translated by Charter97.org).

The average price of Russian oil in April amounted to $54.80 per barrel against $75 a year ago. If the conflict between Iran and Israel drags on, it could raise prices, but so far the effect is limited.

Non-oil and gas revenues are rising thanks to an "overheated" economy: VAT and income tax receipts are increasing. However, GDP growth is slowing down - in the first quarter of 2025, the economy grew by only 1.4% in annual terms, and in quarterly terms it started to shrink.

Inflation is accelerating: potatoes have risen in price by 173% over the year. The central bank raised its key rate to a record 21%, having cut it to 20% in June. Budget spending, especially military spending, continues to rise. In the first quarter, half of the additional spending went to the army.

Although the deficit is already three times higher than the original plan (0.5% of GDP), no economic disaster is expected. The government has the ability to borrow domestically and use the reserves of the National Wealth Fund (1.3% of GDP as of June 1).

Nevertheless, a slowdown in the economy is inevitable. Putin, as before, is leaning toward fiscal stability, which promises stagnation. The main priority remains the same: financing the war in Ukraine. Business and citizens will have to pay for it.

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