Despite a sharp fall in energy revenues, there is no imminent risk of a fiscal crisis in Russia. Accordingly, we don’t share the view that the government needs to tighten policy immediately; indeed, there is merit in keeping policy support in place given the slump in the economy. Instead, Russia is facing a slow-burning fiscal problem. While near-term risks are small, Russia’s public finances are on an unsustainable path and will cause growing problems over the next decade.
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