According to recent data from the central bank, a staggering $253 billion has been withdrawn from Russia since the beginning of the war, with the majority of outflows occurring last year.
Currency strategist Ulrich Leuchtmann from Commerzbank suggests that the recent decline in the value of the ruble may indicate cracks in the capital control system, allowing for a faster outflow of capital from the country.
Erik Meyersson, chief emerging market strategist at SEB in Stockholm, believes that the weakening currency is a result of increased import costs. This has also led to a significant reduction in Russia’s current account surplus, nearly bringing it down to zero. Meyersson remarks, “Nobody wants to hold roubles.”
Russia’s economic challenges have caused the country’s budget deficit to reach its 2023 target in just seven months.
The cost of Russia’s invasion of Ukraine has skyrocketed over the past year, turning the $5.7 billion budget surplus achieved in the same period in 2022 into a substantial deficit.
The budget deficit now stands at 1.8% of gross domestic product (GDP), approaching its target of 2% for the entire year.
Goldman Sachs economist Clemens Fuest expresses doubts about Russia’s ability to contain its budget deficit at 2% in 2023.
He explains that meeting the deficit target would require a sustained tightening of fiscal policy during a time of military conflict, which is a highly unusual situation.
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