Russia’s Deficit Blows Past Target

From January through July, Russia’s federal budget deficit reached 2.8% of gross domestic product, already well above the government’s full-year target of 1.6%. President Vladimir Putin, however, described the deficit as “not critical”, pointing to Russia’s relatively low level of public debt.

Russian spending related to the four-and-a-half-year war in Ukraine continues to weigh on public finances. Economic growth has slowed sharply, while the government has raised taxes and increased borrowing to help finance higher spending.

Ukrainian drone attacks have added to the pressure, repeatedly striking Russian oil refineries and logistics facilities operated by online retailers including Wildberries and Ozon. The attacks on refineries have contributed to fuel shortages, while strikes on warehouses have disrupted businesses and supply chains.

The Bank of Russia will decide on its key interest rate on 11 September. The rate currently stands at 14%. Businesses have pushed for further cuts to support investment and economic growth, although persistent inflation and fiscal pressures could limit the central bank’s room to act.

Putin warned against cooling the economy excessively but defended the central bank’s monetary policy. He also rejected claims that credit had become unavailable, pointing to government programs designed to provide financing on preferential terms.

(Reuters, bak)