Russia: shrinking CA surplus to erode sanctions resilience

A widening of Russia’s budget deficit next year to 2.5% of GDP will increase pressure on the government to keep a firm grip on non-military spending. But it should be able to finance the shortfall from its savings and domestic bond issuance. The bigger concern for Russia’s economy is how quickly energy exports fall and the current account (CA) surplus shrinks. We think there’s a high risk that a large external rebalancing is needed from 2024, which would keep growth extremely sluggish.