GlobalWide News
The Economist: On a normal day, the Tambov Bread Factory produces 30 tonnes of bread in 60 varieties. But recently the Rossiya-1 TV channel revealed that the factory has been converted to produce drones. And now the bakery assembles 250 drones a month. “Drone bakery” may be Kremlin propaganda, but it shows the militarization of the Russian economy.
▪️ The 2024 budget envisages an increase in defense spending by almost 70% to 10.8 trillion rubles, which is almost a third of all spending. Spending on the military sector will be three times higher than spending on education, health care and the environment combined.
▪️ The budget outlook is based on shaky assumptions. The draft assumes that oil and gas revenues in 2024 will grow by more than a quarter to 11.5 trillion rubles, assuming that Brent oil will cost an average of $85 per barrel and Urals oil $70. In case of a decline in oil prices, revenues will be lower than planned. The budget also assumes that in 2024 the ruble-dollar exchange rate will be around 90. However, if the ruble appreciates, revenues from oil and gas exports will fall in ruble terms, reducing government revenues
▪️ GDP growth may also fall short of expectations. The Finance Ministry has put 2.3 percent in its forecast for 2024, more than double the IMF’s projection.
▪️ Even if the government can generate enough revenue to finance its war machine, the long-term economic outlook remains bleak. A devalued ruble makes imports more expensive, driving up inflation and forcing the central bank to maintain high interest rates, suppressing investment. Higher taxes will further stifle growth.
The entire article can be read at the link https://www.economist.com/graphic-detail/2023/10/31/what-russias-new-budget-reveals-about-the-war-in-ukraine
