MOSCOW (Reuters) - Russia faces a budget shortfall of 3 trillion roubles ($39 billion) this year due to falling oil and gas prices, Finance Minister Anton Siluanov said on Wednesday, signaling tough times ahead for the Russian economy.
Oil prices collapsed to four-year lows in March, having lost about 17% only this week as the outlook for fuel demand darkened because of travel and lockdowns in place to curb the spread of the coronavirus epidemic.
“Unfortunately, the situation is developing in not the best way and we are thus deviating from economic forecasts that we had formed for this year,” Siluanov said
Siluanov’s had initially estimated a 2 trillion rouble shortfall in budget revenues, with deficit of 0.9% of gross domestic product (GDP). In nominal terms, this budget deficit is equal to around 1 trillion roubles, according to analysts’ estimates.
The government is rewriting its forecasts as prices for Brent crude LCOc1, a global benchmark for Russia’s main export, fell to $27.83 on Wednesday, well below an average level of $42.4 envisaged by Russia’s 2020 budget plan.
“It’s rather hard for authorities to forecast how strong the fall in the economy and in budget revenues could be. But it’s clear that the impact will be really serious,” Raiffeisen Bank analysts said.
Even despite the budget deficit risks, the finance ministry has sufficient reserves to carry out its spending, including with its National Wealth Fund, Gazprombank analysts said.
The Fund “has enough to cover for the shortfalls in income from lower oil prices for more than five years,” the bank said in a note.
As of March 1, the NWF held 8.2 trillion roubles, or 7.3% of GDP, according to the ministry.
The ministry has said that the country could weather oil prices of $25 to 30$ per barrel for between six and 10 years.
The Kremlin said last week that Russia’s economy had sufficient international reserves of nearly $580 billion and was rather robust to weather any temporary market instability.
Reporting by Darya Korsunskaya; Writing by Andrey Ostroukh and Gabrielle Tétrault-Farber; Editing by Katya Golubkova and Angus MacSwan