bne:Chart – Russia budget deficit a given, but how big?

By bne IntelliNews January 30, 2015

Henry Kirby in London -

 

Amid continued decreases in the price of oil and the weakening of the ruble, Russia's Ministry of Finance has revised the 2015 budget, with spending cuts of 10-15% looking likely.

The budget cuts of at least 10% are now being planned in efforts to soften the blow of low oil prices on Russia’s bottom line, requiring major revisions of both oil price and ruble rate expectations.

The current consensus is that 2015 will see oil average $60 a barrel, the ruble average RUB56 to the dollar, and Russia record a 2% deficit as a result. The original 2015 budget, announced last year, was based on an oil price of $96 per barrel.

Speaking at the World Economic Forum in Davos last week, Russian Deputy Prime Minister Arkady Dvorkovich conceded that, despite the revised budget being modeled on $60/b oil, prices could drop even further. “For a short period of time, prices can be lower than today, $25-30, but not for a long period of time since most of the countries actually want higher prices,” he said.

Russia’s budgetary break-even point last year hinged on $100 oil and a ruble rate of RUB32 per dollar. The current price per barrel of Brent crude is less than half of that. After a brief rally in late December, the ruble has since steadily weakened, trading at RUB69.2 per dollar at the time of writing.

If 2014 is to be taken as a marker of things to come, then the above estimates could well prove to be wide of the mark come the end of the year. Even slight changes in either the oil price or ruble rate parameters would see Russia’s end-of-year balance sheet looking drastically different to current predictions.

The bne:Chart below takes as a starting assumption analysts’ best guess of $60/b oil and a rate of RUB56 per dollar, giving a 2% budget deficit, with all changes relative to this point. Use the sliders to enter various ruble rate and oil price values to see what Russia’s potential deficit or surplus could be.

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss