London (Reuters) – Lower oil prices, stronger budgetary constraints and more fragile financial situations are the main risks facing the Russian economy, according to two working documents prepared by the Russian bank and the Russian Ministry of Economy.

21% interest rates limit loan volumes and investment, which erodes the growth prospects of Russia, warns in its document the Ministry of the Economy.

“An investment deficit today is a growth deficit in two to three years,” summarizes the ministry’s document.

However, the Russian budgetary balance is threatened by the drop in oil prices, warn the two documents.

The report written by the Central Bank is concerned about the “significant risks” of a decline in barrel prices if the American production of crude increases, or if the member countries of OPEC decide to increase their extraction volumes, The unused capacity for the member countries of the organization reaching a record.

Washington knows the impact of the crude crude price on the Russian economy, the US defense secretary Pete Hegseth, having estimated on Wednesday that the drop in energy prices would contribute to bringing Russia to the negotiating table.

“The budgetary constraints at 5-10 years could be stronger than they currently appear,” notes the central bank in fact.

Energy income, directly dependent on the level of crude price, represent approximately a third of the Russian state tax revenues, while the budget deficit flew to 1,700 billion rubles (18 billion euros) Just in January.

This deficit is now funded by the Russian sovereign fund, which has seen its volumes of liquid assets drop from $ 112.7 billion (108 billion euros) in early 2022 to 37.5 billion dollars.

“This fund is not intended to cover prolonged periods of budget deficit,” recalls the central bank in its report.

The Central Bank and the Ministry of the Economy did not respond to requests for comments. The two reports were prepared for a meeting scheduled for February 4 with Prime Minister Mikhail Michoustine.

COSTS

The Ministry of Economy is also concerned about the surge in costs for companies, linked to tensions on the labor markets and the progression of customs tariffs, charges of interest and taxes.

In 2025, these additional costs would represent 14,800 billion rubles compared to 2024, or 45% of the volume of private investments in bodily fixed assets in 2024, calculates the ministry’s report.

The decline in domestic and international demand could limit the power to fix business prices and erode their margins, add the document.

The private sector could be faced with a more difficult financial situation, which would advance non-performative loan volumes, which companies cannot honor.

In public, Russian President Vladimir Putin and the country’s senior officials regularly praise the resistance of domestic activity despite international sanctions, judging that persistent inflation is the main economic challenge.

In private, Vladimir Putin would however be more and more concerned with the distortions triggered by the war, because the shortages of generalized labor, the low ruble and the highest interest rates for more than twenty years weigh on the country’s growth prospects.

(Reuters; Corentin Chappron, edited by)

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