Putin: Russian budget to be in surplus for Q3, deficit of around 2% of GDP expected for year

MOSCOW. Aug 22 (Interfax) - Russia's federal budget will be in surplus for the third quarter while there will be a deficit of around 2% of GDP for the year, as planned, President Vladimir Putin said at a meeting of the council for strategic development and national projects.

"It is anticipated that the budget will be in surplus for July-September. In the year as a whole expenditure will exceed revenue by the planned level of approximately 2% of GDP," he said.

"The current fiscal situation is generally robust and poses no risks to macroeconomic stability," he said.

Russia's federal budget deficit was 2.817 trillion rubles or 1.8% of GDP in January-July 2023, according to preliminary Finance Ministry data. The deficit widened by 222 billion rubles in July - the ministry had estimated it at 2.595 trillion rubles for January-June.

The government and the Central Bank of Russia should make more active use of the tools they have in their arsenal to reduce financial market volatility, Russian President Vladimir Putin said at the council.

"In recent months, volatility in financial markets has increased significantly, we are all well aware of this. Obviously, such fluctuations make it difficult for businesses, enterprises and citizens to make investment decisions. The Government and the Bank of Russia need to make more active use of available tools, fine-tune them given the objective situation, and here we need to work, among other things, on limiting unproductive, speculative demand in the economy, controlling capital outflow, monitoring the behavior of other financial market participants," he said.

Inflationary risks in Russia have been rising of late and reigning price growth is a top priority; the government and Central Bank of Russia need to develop the corresponding economic policy, President Vladimir Putin said at the meeting.

"Objective data show that inflationary risks - I want to draw attention to this, my colleagues and I have constantly been addressing this topic lately - inflationary risks are nevertheless growing. And the task of curbing price growth is now coming to the fore," he said.

"I ask colleagues from the government and Central Bank to keep the situation under constant control and to develop economic policy accordingly," Putin said.

"I know that there are many arguments here, but we have always found a consensus so far, and we will find one now," he said.

According to Rosstat, inflation in Russia from the start of the year through August 14 was 3.52%.

As reported, the Bank of Russia raised the key rate on August 15 by 350 basis points to 12% at an extraordinary meeting of the Board of Directors.

In the press release on the rate, the Central Bank did not give its traditional signal about the future direction of monetary policy. In the statement following the extraordinary meeting of the board of directors, only the basic phrase remained: "The Bank of Russia will make further decisions on the key rate, taking into account actual and expected inflation dynamics relative to the target, the process of the structural adjustment of the economy, as well as by assessing the risks from internal and external conditions and the reactions of financial markets to them."

Later, the Bank of Russia announced that in the event of increased pro-inflationary risks, an additional increase in the key rate is possible. "The Bank of Russia will make further decisions on the key rate based on the extent to which the actual and expected dynamics of inflation move relative to the target, the process of economic restructuring, and the risks from internal and external conditions and the reaction of financial markets to them which could further increase the risk of upward deviations of inflation from the target near 4% in 2024," the regulator said.

The Central Bank predicts that annual inflation in Russia in 2023 will be 5.0-6.5% and will return to 4% in 2024.

The forecast from the Russian Economic Development Ministry as of April 2023 assumes inflation for the current year at about 5.3%.

The consensus forecast of economists polled by Interfax in early August is 6.0% for inflation in 2023 (up from 5.7% in a survey in early July), and 4.8% for inflation in 2024 up from 4.6% in a survey a month ago.