SOVEREIGN ECONOMY: TOP EVENTS OF THE WEEK
28/07/2023, 11:30
The Central Bank of Russia raised the key interest rate by 100 basis points on July 21, 2023, from 7.5% to 8.5%. This change marks the first increase since the beginning of Autumn 2022. The decision aims to curb inflation but also implies negative consequences - a slowdown in economic development. The reduced pace of production development will decrease companies' tax contributions, leading to a deficit in the government budget.
The current year's federal budget deficit in Russia may exceed the planned value. According to the Minister of Finance, Anton Siluanov, the deficit is expected to be around 2-2.5% of the GDP. According to the "Electronic Budget" portal, the revenues of the Russian budget amounted to 12.779 trillion rubles, while the expenses were 16.420 trillion rubles, resulting in a deficit of 3.642 trillion rubles as of July 20.
The Kremlin stated that the grain deal was not completely terminated. Yuri Ushakov, an aide to the President of Russia, announced that the deal is "not definitively terminated but suspended". According to him, Russia is ready to return to it if the obligations towards the Russian side are fulfilled. Ushakov's statement confirms that the Kremlin is using the blocking of the grain deal to mitigate the impact of sanctions.
The production of liquefied natural gas (LNG) in Russia is declining. According to Rosstat, 2.3 million tons of LNG were produced, which is 8.7% less than in June 2022 and 20.9% less than in May 2023. Although LNG, unlike oil, is not a subject to sanctions. Many importers are still trying to reduce their dependence on Russian gas.
The U.S. Treasury Department has announced one of the most extensive updates to the Russian sanctions list. The sanctions imposed by the United States affected 18 Russians (including former Finance Minister Alexei Kudrin), more than 90 organizations, and 14 vessels. These sanctions are another step in limiting Russia's military potential, its ability to obtain supplies for the military and economic profits.
