In January, Russia ‘s finance ministry was forced to liquidate its foreign exchange reserves and gold due to a colossal budget shortfall of 23.1 billion euros. Harvard economist Ken Rogoff asserts that the country is regressing into poverty, similar to other countries like North Korea, Venezuela, or Iran. Anton Siluanov has potentially one of the most formidable tasks among Kremlin leadership: as Finance Minister, he must manage an unbelievable budget deficit totaling 1.77 trillion rubles—the equivalent of about 23.1 billion euros!
With only a month into the year, Russia has already encountered 60% of its projected twelve-month budget deficit. To avoid an economic collapse with all Russians buried in the wreckage, it is essential to save it before time runs out!
Falling Gas and Oil Revenues are the Biggest Reasons for Budget Deficit
The alarming budget deficit was caused by a steep 46% plunge in oil and gas sales compared to the same period last year. Consequently, Russia‘s revenue collection dropped 35%, significantly lower than in the final month before the 2022 war broke out.
While the sanctions will negatively affect Russia‘s finances, their military operations are still viable due to large reserves of gold, euros, and yuan. The Russian Ministry of Finance has reported that these resources amount to 10.4 billion euros, 307.4 billion yuan, and 551.2 tons of gold – an impressive accumulation for this time period despite being lower than what was outlined in November 2022.
Russia Economist: GDP Is Not A Reliable Metric In War Situations
The renowned Russian economist Sergei Gurijew proclaimed at the “Global Economy Lecture 2023” held by the Austrian National Bank in Vienna last January that Gross Domestic Product is an inadequate gauge during times of war.
According to Guriyev, head of the renowned Sciences Po in Paris and an expatriate from Russia since 2013, GDP has virtually no bearing on the actual economy during a war as weapons production skyrockets. While many products are generated this way, they are never available in markets accessible by all. Moreover, he considered Western sanctions against Russia effective.
Former Deputy Energy Minister Vladimir Milov, who fled Russia, calls official data on GDP or a recovery in the ruble “Potemkin indicators.” They would be an indicator of the actual economic situation. On the other hand, the decline in private consumption by almost 10% in 2022, or the 7.5% lower water consumption in the country, is more meaningful. This is important for industrial production and oil production.
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