Russia faces higher deficit next year than planned, ruble strengthens
According to Finance Minister Anton Siluanov, Russia is now facing a “considerably higher” deficit next year than it was expected as the economy slips toward recession.
“If incomes are lower and the main spending is fully financed, then we’ll have to use reserves and increase the deficit,” Siluanov told reporters in Moscow. “One year with a deficit isn’t so scary, the most important thing is to prepare future budgets.”
According to the central bank's stress scenario, Russia's GDP may slide at least 4.5 percent in 2015 if crude averages $60 per barrel. Next year’s budget gap was planned at 0.6 percent. Oil, Russia’s biggest source of revenue, is trading near a five-year low, worsening the impact of U.S. and European sanctions.
Russia’s 1 trillion-ruble plan to recapitalize banks will push this year’s budget into the biggest deficit in four years, reaching 0.8 percent to 0.9 percent, compared with a surplus of 0.6 percent estimated earlier.
As Siluanov said, the upper house of parliament, the Federation Council, passed bills today to support banks, whose capital adequacy has dropped after the sanctions curbed access to capital markets and the ruble plummeted.
The Russian currency is solidifying for a fifth day, gaining 2.1 percent to 52.3495 by 12:58 p.m. in Moscow as the central bank and government moved to shore up the currency, stemming the worst ruble’s decline since 1998.
The approved bills provide the Deposit Insurance Agency the additional 1 trillion rubles ($19 billion) using domestic bonds known as OFZs, give it the right to invest in subordinated loans and preferred shares of banks and allow it to buy stakes in lenders before they face bankruptcy.
Other measures include the doubling of insured deposits to 1.4 million rubles and the potential to invest as much as 10 percent of the National Wellbeing Fund, one of two sovereign wealth funds, to boost lenders’ capital.
