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☆ Analysis-Russia's GDP Boost on Military Spending Belies Wider Economic Woes
▼ + stars: | 2024-02-07 | by ( Feb. | At A.M. | ) www.usnews.com time to read: +5 min

Other economists say Russia is pumping the economy with one-time, unproductive investments that yield limited future benefit. 'NOT ALL GROWTH IS GOOD'The International Monetary Fund expects Russia's economy to grow faster than all G7 economies this year but less than emerging European economies. Military expenditure has supported economic growth of countries at war throughout history. According to Rosstat, Russia's labour productivity index, one of Putin's key national development goals, fell 3.6% year-on-year in 2022, its steepest annual fall since the aftermath of the global financial crisis in 2009. "I don't see current economic growth as lasting or qualitative," said Nadorshin.

Persons: Darya Korsunskaya, Alexander Marrow, Vladimir Putin, Sergei Khestanov, Alexandra Suslina, CAMAC, Rosstat, Anton Kotyakov, Yevgeny Nadorshin, Central Bank Governor Elvira Nabiullina, Darya, Gareth Jones Organizations: Statistics, Reuters, Soviet Union, International Monetary Fund, IMF, Labour, PF, Central Bank Governor Locations: Russia, Ukraine

MOSCOW, Nov 29 (Reuters) - Russia's industrial output growth slowed in October as the unemployment rate dropped to a record low 2.9%, federal statistics showed on Wednesday, with deepening labour shortages showing signs of cooling Moscow's military production capacity. Analysts say wages are growing faster than productivity and the central bank has warned of the impact it has on inflation. Industrial output rose 5.3% year-on-year in October, down from a 5.6% rise in September and driven once again by military production. Rosstat said industrial output had grown since March at a monthly rate of more than 5% compared with the corresponding months of 2022. But when discounting seasonal factors, industrial production dropped 0.4% in October, Rosstat said.

Persons: Maxim Oreshkin, Vladimir Putin, Central Bank Governor Elvira Nabiullina, Rosstat, Alexander Marrow, Darya, Alex Richardson, Alexandra Hudson Organizations: Kremlin, Reuters, VW, Central Bank Governor, Alexandra Hudson Our, Thomson Locations: MOSCOW, Russia, Volkswagen's, Moscow, Ukraine, Putin's Russia

"This super pre-emptive right will work only in specific cases, with specific companies," Chebeskov said on the sidelines of a financial forum in Moscow on Nov. 14. "The idea was that this concerns only those strategic companies in which the state already has a share," Chebeskov said. The lack of clarity and uncertain timeline highlights the unpredictable nature of regulatory changes facing investors and businesses seeking to adjust their exposure to Russia. This compares with net outflows of around $48 million in March 2022 and $69 million in February this year. Western investors have already struggled to get assets out of Russia.

Persons: Vladimir Putin, Ivan Chebeskov, Chebeskov, Rybalkin, Tskhakaya, Thomas J Brock, Carlsberg's, Putin, JP Morgan, JPM, Vijay Marolia, Brock, Sinead Cruise, Alexander Marrow, Elena Fabrichnaya, Darya Korsunskaya, Jane Merriman Organizations: Ukraine LONDON, Reuters, Nato, Dyakin, Partners, Kaiser Consulting, Investors, Morningstar Direct, Federal Property Agency, Assets, Deutsche Bank, Regal Point Capital, HSBC, Expobank, Thomson Locations: Russia, Ukraine, MOSCOW, Moscow, Russian, Magnit, London

The logo of Russian technology giant Yandex is on display at the company's headquarters in Moscow, Russia December 9, 2022. Dutch holding company Yandex NV's planned restructuring is aimed at recouping some shareholder funds with the sale of its main revenue-generating Russian businesses, such as its search and ride-hailing operations. 'CONTROL FOR LESS'Yandex NV may sell 100% of a holding company set up in Russia's Kaliningrad region, said one of the people. A third source said this scenario would see Yandex NV make a clean break with Russia. Yandex NV shareholders could easily have been left with nothing, said one of the sources.

Persons: Evgenia, Yandex, Yandex's, Arkady Volozh, Russia's, nationalising Yandex, Darya Korsunskaya, Alexander Marrow, David Goodman, Bernadette Baum Organizations: REUTERS, Kremlin, VK, Reuters, Carlsberg, Danone, Yandex, Thomson Locations: Moscow, Russia, Ukraine, Yandex, Dubai, Russia's Kaliningrad, nationalising

☆ Russian state won't take part in organising frozen asset 'exchange'
▼ + stars: | 2023-11-09 | by ( ) www.reuters.com time to read: +2 min

Nov 9 (Reuters) - Russia's finance ministry on Thursday said the state would not take part in organising frozen asset 'exchanges', instead leaving that up to financial market players. International sanctions against Moscow over its invasion of Ukraine have blocked many Russian investors' access to securities held in jurisdictions outside the country, while Russian countermeasures have frozen Western funds within. "The decree ... creates legislative opportunities for conducting the "exchange" of frozen assets, the state will not take part in organising the exchange itself," the finance ministry said. Organising exchanges was down to brokers and other securities market participants, it said. "The decree refers to the use of foreign investors' funds in type-C accounts."

Persons: Vladimir Putin, Central Bank Governor Elvira Nabiullina, Nabiullina, Anton Siluanov, Siluanov, Darya Korsunskaya, Alexander Marrow, Toby Chopra, Bernadette Baum Organizations: Wednesday, Moscow, Central Bank Governor, Finance, Thomson Locations: Moscow, Russia, Ukraine

But Russia's Accounts Chamber, which oversees budget execution, warned on Monday there were risks the Urals price would fall below $60 in 2024-2026. Russia's forecast sees economic growth of 2.3% in 2024, well above estimates of 1.1% from the International Monetary Fund and 0.5%-1.5% from the Bank of Russia. CHANGING TUNEAt Russia's flagship economic forum in St Petersburg in June, Siluanov said increasing expenditure was difficult, as budget spending had already increased by 1-1/2 times from 2019 to 2022. Now, even as the government outlines plans for spending to jump to 36.7 trillion roubles in 2024, he is more relaxed. Renaissance Capital's Donets and Melaschenko said Russia could create temporary taxes, permanently increase rates of VAT, or adjust Russia's budget rule to permit more spending of energy revenues.

Persons: Evgenia, Anton Tabakh, Vladimir Putin, Anton Siluanov, Denis Popov, Yevgeny Suvorov, Suvorov, Sofya Donets, Andrei Melaschenko, Dmitry Polevoy, Siluanov, Melaschenko, Alexei Sazanov, Sazanov, Konstantin Sonin, It's, Sumanta Sen, Mark Trevelyan, Alexander Marrow, Catherine Evans Organizations: U.S ., Russian, REUTERS, Washington, Finance, International Monetary Fund, Bank of Russia, Capital, Reuters Graphics Russia, University of Chicago, Thomson Locations: Moscow, Russia, Ukraine, West, St Petersburg

In 2021, the year before Moscow launched its invasion of Ukraine, defence spending totalled 3.57 trillion roubles, 14.4% of total spending. In 2022, the share of defence spending rose to 17.7%, data on Russia's electronic budget page showed earlier this year. That may mean that defence spending will also be significantly higher than first envisaged. Moscow doubled its target for defence spending in 2023 to 9.7 trillion roubles, Reuters reported exclusively in August, citing a government document. EDUCATION, HEALTHCARE FREEZEAs defence spending in 2024 triples from pre-invasion levels, the share of spending on "national security", which covers funding for law enforcement agencies, is also rising, set to reach 9.2% in 2024, the documents showed.

Persons: Vladimir Putin, Mikhail Metzel, Anton Siluanov, Siluanov, Donets, Dmitry Peskov, Darya, Alexander Marrow, Philippa Fletcher Organizations: Sputnik, REUTERS, Defence, Reuters, CIS, Renaissance, Thomson Locations: Moscow, Russia, Kremlin, Ukraine, Russian

Finance Minister Anton Siluanov said Russia would return to following its budget rule in 2024, envisaging an oil price of $60 per barrel. The government was discussing budget plans for the next three years. Bloomberg News reported that Russia is also planning a huge hike in defence spending next year, swelling to 6% of GDP from 3.9% in 2023 and 2.7% in 2021. Siluanov said Russia planned to raise domestic borrowing to more than 4 trillion roubles annually to fund its deficits. Siluanov said Russia's NWF would hold 6.7 trillion roubles by end-2024, down from 13.7 trillion roubles, or 9.1% of GDP as of Sept. 1.

Persons: Vladimir Putin, Denis Manturov, Alexei Krivoruchko, Mikhail Metzel, Mikhail Mishustin, Mishustin, Anton Siluanov, Siluanov, Russia's, Vladimir Soldatkin, Darya Korsunskaya, Alexander Marrow, Mark Trevelyan Organizations: Sputnik, REUTERS Acquire, Finance, National Wealth Fund, Bloomberg News, Reuters, Thomson Locations: Izhevsk, Russia, Ukraine MOSCOW, Moscow, Ukraine

National flag flies over the Russian Central Bank headquarters in Moscow, Russia May 27, 2022. On Friday, it gave hawkish guidance that it would consider further rate increases at upcoming meetings and said inflationary risks remained significant. The central bank adjusted its year-end forecast for inflation to 6.0-7.0% from 5.0-6.5%. "Russia's central bank is a hawkish institution that takes its commitment to inflation fighting seriously," said Senior Emerging Markets Economist Liam Peach. Central Bank Governor Elvira Nabiullina will shed more light on the bank's forecasts and policy in a media briefing at 1200 GMT.

Persons: Maxim Shemetov, jacking, Liam Peach, Central Bank Governor Elvira Nabiullina, Alexander Marrow, Elena Fabrichnaya, Darya Korsunskaya, Maria Kiselyova, Amruta Khandekar, Andrew Osborn, William Maclean, Catherine Evans Organizations: Russian Central Bank, REUTERS, Kremlin, Capital Economics, Central Bank Governor, Thomson Locations: Moscow, Russia, Russian, Ukraine MOSCOW, Ukraine, London

☆ Russian gas exports to EU seen dropping sharply in 2023, state bank VEB says
▼ + stars: | 2023-09-05 | by ( ) www.reuters.com time to read: +2 min

VEB expects total Russian natural gas exports to fall this year to 100 bcm from 131 bcm in 2022. According to Reuters calculations, pipeline natural gas exports to Europe by Kremlin-controlled Gazprom (GAZP.MM) have declined to around 17.7 bcm so far this year. Europe drastically cut purchases of Russian oil and gas following the start in February 2022 of what Moscow has called a special military operation in Ukraine. VEB also expects Russian crude oil exports to decline to 230 million tons (4.6 million barrels per day) this year from 248 million in 2022, amid a possible drop in supplies to the EU to 41 million tons from 115 million tons. VEB forecasts that Russian oil exports will recover to 239 million tons in 2026 thanks to a boost in supplies to China and India.

Persons: Alexander Novak, Darya Korsunskaya, Vladimir Soldatkin, Paul Simao Organizations: Gazprom PAO, European, VEB, Gazprom, Thomson Locations: MOSCOW, European Union, Russian, Europe, Kremlin, Moscow, Ukraine, Russia, Asia, China, India

Under its budget rule, Russia sells foreign currency from its National Wealth Fund (NWF) to make up for any shortfall in revenue from oil and gas exports, or makes purchases in the event of a surplus. The central bank restarted its own separate interventions this month, selling 2.3 billion roubles' worth of foreign currency a day, something it said it would continue to do. The bank's decision means that from Thursday, daily FX sales will total 2.3 billion roubles, as opposed to net sales of 0.5 billion roubles envisaged previously. The bank said it may defer purchases within the budget rule framework to 2024. "We may see new measures to stabilise the situation on the FX market," the analysts said.

Persons: Elena Fabrichnaya, Alexander Marrow, Darya Korsunskaya, Kevin Liffey, Kirsten Donovan Organizations: of Russia, National Wealth Fund, Bank of, FX, Thomson Locations: Russia, Ukraine MOSCOW, Moscow, London

☆ Higher debt burden 'inevitable' as Russia spends on military bloc -finance ministry
▼ + stars: | 2023-07-18 | by ( ) www.reuters.com time to read: +2 min

Russia's current level of debt is 22.8 trillion roubles, or 14.9% of gross domestic product (GDP), Deputy Finance Minister Irina Okladnikova said on Tuesday, naming 20% of GDP as the upper boundary of the safe debt limit. "We understand that in the current situation, we will increase debt, it is a hopeless situation," said Okladnikova at a meeting in Russia's upper house of parliament. "Therefore, we will increase debt, but we will try to remain within safe limits," Okladnikova said. Finance Minister Anton Siluanov said 2024 budget spending would be cut by around 450 billion roubles - 10% of so-called 'unprotected' spending - to free up money for other priorities. "We have budget expenditure of a little more than 29 trillion roubles," he said, with just 4.5 trillion in line for cuts, implying around 450 billion roubles (4.97 billion) slated for redistribution next year.

Persons: Irina Okladnikova, Okladnikova, Anton Siluanov, Siluanov, Darya, Alexander Marrow, Alexandra Hudson Organizations: Alexandra Hudson Our, Thomson Locations: Moscow, Ukraine's Donetsk, Luhansk, Kherson, Zaporizhzhia, Kyiv

☆ Moscow takes control of Russian subsidiary of Danone and Carlsberg's stake in brewer
▼ + stars: | 2023-07-16 | by ( ) www.reuters.com time to read: +1 min

MOSCOW, July 16 (Reuters) - The Russian state has taken control of French yoghurt maker Danone's (DANO.PA) Russian subsidiary along with beer company Carlsberg's (CARLb.CO) stake in a local brewer, according to a decree signed by President Vladimir Putin on Sunday. The decree said that foreign-owned stakes in Danone Russia and Baltika Breweries were being put under the "temporary management" of government property agency Rosimushchestvo. The move comes after the Russian subsidiaries of Germany's Uniper (UN01.DE) and Finland's Fortum (FORTUM.HE) were taken under state control in April. The decree published on Sunday also said that Danish brewer Carlsberg's stake in Russian-based Baltika Breweries had been put under state management. Carlsberg said in June it had signed an agreement to sell its Russian business, subject to regulatory approvals.

Persons: Vladimir Putin, Finland's, Danone, Carlsberg's, Carlsberg, Caleb Davis, Darya, Andrew Osborn Organizations: Sunday, Danone Russia, Baltika Breweries, Danone, Carlsberg, Thomson Locations: MOSCOW, Russian, Russia

REUTERS/Stringer/File PhotoSummary Fears of civil war rose in world's biggest nuclear powerMercenaries posed biggest threat to Putin in 23-year rule'Anyone with anything to lose was extremely tense' -sourceThe elite wonder: What's next for Russia? One fear was that Yevgeny Prigozhin's Wagner mercenary group, if he entered Moscow, would try to take over the economy, triggering yet another redistribution of ownership in Russia, the world's biggest supplier of natural resources. The source spoke on condition of anonymity due to the danger of speaking publicly in contemporary Russia. Russians started to withdraw significant amounts of roubles and seek foreign currency in 15 regions across Russia. But within the elite, there is now a fear that Putin will seek to assert his position and remove those he felt did not profess their loyalty with enough ardour.

Persons: Wagner, Stringer, Putin, What's, Vladimir Putin, Yevgeny Prigozhin's Wagner, Prigozhin's, Mikhail Gorbachev, Andrei Belousov, Dmitry Gusev, Alexander Lukashenko, Prigozhin, Russia's, Sergei Shoigu, Valery Gerasimov, Viktor Zolotov, Guy Faulconbridge, Mark Heinrich Our Organizations: Southern Military District, REUTERS, Reuters, Kremlin, KGB, Bolshevik, Air, Jets, General Staff, National Guard, Thomson Locations: Rostov, Don, Russia, MOSCOW, Moscow, Russian, Soviet, Ukraine, Belgrade, Istanbul, Dubai, Sochi, Belarus, Belarusian, Zolotov

☆ Russia's oil and gas budget revenues fell by almost 36% y/y in May
▼ + stars: | 2023-06-05 | by ( ) www.reuters.com time to read: +2 min

MOSCOW, June 5 (Reuters) - Russia's federal budget revenues from oil and gas, the lifeblood of its economy, fell almost 36% in May from the same month last year and declined by 12% from April, the finance ministry said on Monday, as a result of a lower profit-based oil tax. Budget income from oil and gas sales reached 570.7 billion roubles ($7 billion) last month, compared to 886 billion in May 2022 and 647.5 billion in April 2023. This was lower than the 593 billion roubles expected by Reuters. Proceeds from the profit-based oil tax fell to 5.4 billion roubles in May from April's 185.4 billion roubles due to the frequency payment pattern of the tax. Proceedings from mineral extraction taxes declined in May by a quarter from the same period in 2022 to 703.6 billion roubles, while revenues from exports duties fell by 74% to 66.1 billion roubles.

Persons: Darya Korsunskaya, Vladimir Soldatkin, Mark Trevelyan Organizations: Reuters, Thomson Locations: Russia, Ukraine, MOSCOW, April's

[1/3] A tyre produced by the Finnish group Nokian Tyres on display at a dealership in Moscow, Russia, March 23, 2023. Nokian Tyres' protracted departure illustrates the growing headwinds faced by Western companies that have yet to fully depart the country. "The war changed the operating environment in a rapid and unpredictable way," Nokian Tyres' Chief Transformation Officer Johanna Horsma told Reuters. Additional valuation requirements published in mid-December came in the middle of Nokian Tyres' transaction, he added. The buyer needs to be well selected to avoid scammers, said Nokian Tyres' Horsma.

Persons: Maxim Shemetov, Johanna Horsma, Finland's Fortum, Germany's, Peter Wand, Baker McKenzie, Thomas Kormendi, Kormendi, Alexei Moiseev, Moiseev, Nokian, Tatiana Stanovaya, Elopak, Baker McKenzie's Wand, Alexander Marrow, Darya Korsunskaya, Matt Scuffham, Kirsten Donovan Organizations: Nokian Tyres, REUTERS, Finland's, U.S . Treasury, Reuters, Companies, Thomson Locations: Moscow, Russia, finalising, Ukraine, Western, Frankfurt

May 31 (Reuters) - Russia's unemployment rate dropped to a record low 3.3% in April, data showed on Wednesday, highlighting the labour shortage that is stifling economic growth, while other indicators painted a mixed picture. Retail sales, a key gauge of consumer demand, fell 0.1% compared with March and industrial output dropped 5.0%. Excluding seasonal factors, economic growth slowed to 0.2% in April, the ministry said. Russia's market has changed drastically since the sanctions war began, Tsukhlo said, with mass-market and expensive brands alike leaving the country. "(They) could have been replaced by Russian light industry products, but there is no one there to produce them," he said.

Persons: Sergei Tsukhlo, Tsukhlo, Alexander Marrow, Darya, Alison Williams Organizations: Russia's Gaidar, Thomson Locations: Russia, Ukraine, Moscow, Russian

☆ Russian economy shrank 1.9% in first quarter, statistics service says
▼ + stars: | 2023-05-17 | by ( ) www.reuters.com time to read: +1 min

May 17 (Reuters) - Russia's economy shrank 1.9% year-on-year in the first quarter of 2023, data from the Rosstat federal statistics service showed on Wednesday, following growth of 3% in the same period of last year. Russia's economy defied early expectations of a double-digit collapse in 2022, but still contracted 2.1% after the West imposed sanctions in response to Moscow despatching troops to Ukraine in February. The economy ministry this month estimated that gross domestic product (GDP) had fallen 2.2% in the first quarter, while the central bank has predicted a 2.3% decline. That follows a 2.7% drop in the fourth quarter of last year, according to Rosstat data. Reporting by Darya Korsunskaya and Alexander Marrow; Editing by Toby ChopraOur Standards: The Thomson Reuters Trust Principles.

☆ Russia's oil and gas budget revenue drops sharply in April
▼ + stars: | 2023-05-04 | by ( ) www.reuters.com time to read: +1 min

Budget income from oil and gas sales reached 647.5 billion roubles ($8.3 billion) last month, compared to 688.2 billion in March and 1.798 trillion roubles in April 2022, it said. Subsidies from the budget to the refining companies from the oil reverse excise tax rose by 38 billion roubles to 79.3 billion roubles in April, while the same payments to oil refineries under the "damping mechanism" rose to 107.2 billion roubles from 96.7 billion roubles in March. At the same time, profit-based tax revenues from oil producers fell last month to 185.4 billion roubles, from 220.6 billion roubles in March. Russia's mineral extraction tax (MET) and export duty revenues rose in April from March by 6.5%, or 36.4 billion roubles, and by 13.5%, or 6.8 billion roubles, respectively. The finance ministry has budgeted for a 23% reduction in oil and gas revenues this year to 8.95 trillion roubles.

☆ Russian economy shrank estimated 2.2% year over year in first quarter, economy ministry says
▼ + stars: | 2023-05-03 | by ( ) www.reuters.com time to read: +1 min

May 3 (Reuters) - Russia's economy contracted by 2.2% in the first quarter of 2023 in annual terms, the economy ministry estimated on Wednesday, down from growth of 3% in the same period last year. The ministry estimated that gross domestic product (GDP) fell 1.1% year-on-year in March, an improvement on a revised 2.9% drop in February. Russia's GDP is expected to rebound marginally this year from a 2.1% annual decline in 2022, the result of Western sanctions against Moscow after it despatched troops to Ukraine in February 2022. Blunting the impact of sanctions are rising military production and huge state spending, allowing Moscow to plough on with what it calls its "special military operation" in Ukraine. Reporting by Darya Korsunskaya and Jake Cordell; Writing by Alexander Marrow; Editing by Kevin LiffeyOur Standards: The Thomson Reuters Trust Principles.

The economy ministry forecast GDP growth of 2% in 2024, down from 2.6% when it last provided macroeconomic forecasts in the autumn. SHRINKING SURPLUSRussia's current account surplus is shrinking sharply, down around 73% in the first quarter of 2023. Economists from the Institute of International Finance said Russia had a large "excess" current account surplus in 2022, with a surplus above and beyond the normal seasonal path in 2021 and 2022. "This windfall has ended in 2023, with Russia's current account surplus below 'normal', likely one reason why the rouble has weakened year-to-date," it added. The economy ministry lowered its rouble rate forecast to 76.5 to the dollar in 2023, from 68.3 in the previous forecast, and to 76.8 from 70.9 in 2024.

But based on Friday's figures, Russia posted a surplus in March of 181 billion roubles, improving on deficits of 821 billion roubles in February and 1.76 trillion roubles in January. Spending accelerated 34% in the quarter to 8.1 trillion roubles, the preliminary data showed. Overall government income was down 20.8% in the quarter compared with 2022 at 5.7 trillion roubles, led by a 45% dive in energy revenues to 1.64 trillion roubles, the data showed. "The large budget deficit...increases nervousness on the market in relation to the price that geopolitical tensions are costing, and requires efforts directed at improving budget revenues," she said. The central bank has repeatedly warned that the budget deficit poses inflationary risks and may compel it to raise interest rates from the current 7.5%.

☆ Russia's weekly consumer prices rise quickened in late March
▼ + stars: | 2023-04-05 | by ( ) www.reuters.com time to read: +2 min

MOSCOW, April 5 (Reuters) - The rise in Russia's weekly consumer prices quickened at the end of March, data from state statistics service Rosstat showed on Wednesday, with authorities still fighting to slow inflation. Russia's central bank held the key interest rate at 7.5% last month, maintaining a hawkish stance as a widening budget deficit and labour shortages pose ongoing inflationary risks. On Wednesday, Central Bank Deputy Governor Alexei Zabotkin maintained that hawkish signal, addressing the State Duma, Russia's lower house of parliament. Consumer prices rose 0.13% in the week to April 3, Rosstat said, compared with a 0.05% rise the previous week. Russia's annual inflation rate in 2022 was 11.9%, almost three times the official 4% target.

☆ Russia's March energy income drops 43% y/y, quarterly tax supports monthly revenue
▼ + stars: | 2023-04-05 | by ( ) www.reuters.com time to read: +2 min

Budget income from oil and gas sales reached 688.2 billion roubles ($8.67 billion) last month, compared to 521.2 billion in February and 1.21 trillion roubles in March 2022, according to finance ministry estimates. March revenues increased thanks to a 220.6 billion roubles in quarterly payments for a profit-based tax on hydrocarbon extraction. The mineral extraction tax (MET) on oil was 63.6 billion roubles lower than in February, while the MET on natural gas, was 12.9 billion roubles lower. The finance ministry has budgeted for a 23% reduction in oil and gas revenues this year to 8.95 trillion roubles. Total 2022 energy revenues of 11.6 trillion roubles jumped by 27.9% compared to 9.1 trillion roubles in 2021, by interim dividends and a one-off tax payment by gas giant Gazprom (GAZP.MM).

Last week's official data showed annual industrial output decline slowed in February, largely thanks to the defence sector, offsetting some of the damage wrought mainly by sanctions on Russia's key energy exports. Russian industrial output fell 1.7% year-on-year in February after a 2.4% drop in January, data from the federal statistics service Rosstat showed. Polevoy estimated that non-defence industrial production shrank about 8% year-on-year, while output of sectors with a high share of state defence orders jumped 36%. The decline in energy revenues has pushed Russia's budget deficit to $34 billion in January-February, compared with a surplus of $4 billion in 2022. LONG-TERM DECLINEAn independent study last month suggested Russia's middle class will shrink as social inequality grows, even if sanctions get relaxed.

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