Russia expects its budget deficit to double in 2025, reaching 1.5% of GDP, which represents three times the government's target to reduce this deficit to 0.5%. This comes at a time when the country is preparing for a long period of declining global oil prices, posing a significant challenge to the Russian economy, according to a survey conducted by Reuters among several economists on Wednesday.
These forecasts come at a time when the global economy is experiencing a slowdown due to increasing trade wars, which negatively affects the demand for oil, which saw a sharp decline in prices of over 11% last April.
In light of these developments, Russia has adjusted its forecast for the average price of Brent crude in 2025, cutting expectations by about 17% compared to its previous estimates in September of last year. The country has also revised its expectations for oil and gas export revenues for the period between 2025 and 2027, with anticipated revenues declining by 15% this year.
Based on oil price estimates of $70 per barrel, the deficit was expected to widen to 0.5% of GDP, but with oil prices dropping to around $60 per barrel, finance ministry officials acknowledged that the deficit would rise to 1% of GDP.
Economic forecasts also showed a sharp slowdown in GDP growth, with a projected decrease to 1.6% in 2025, compared to 4.3% in 2024. The annual inflation rate is also expected to rise slightly to 7.0% in 2025, compared to 6.8% in previous forecasts. The rise in inflation has forced the Russian central bank to keep its key interest rate at 21% this month.
On the other hand, economists expect the central bank to cut the key interest rate in the third quarter of 2025, as inflation continues to decline and economic growth slows. Regarding the ruble, which has seen a 38% increase against the US dollar this year, it is expected to decline to 95 rubles per dollar in the coming 12 months, supported by expectations of a peaceful settlement in the Ukrainian conflict. This decline in the value of the ruble is expected to negatively affect the Russian budget due to lower energy export revenues when converted to the local currency.
