The United States backing out of the Iran nuclear deal, and general tensions in the Middle East, have boosted crude oil prices on international markets. The result is windfall profits for the Russian federal budget.
Once expecting a shortfall of 1.3% of GDP, the Kremlin now expects a 0.45% surplus. The 2018 budget surplus may amount to 440.6 billion rubles, instead of previously expected deficit of 1.27 trillion rubles, reported Russian state news agency TASS. The amended budget also increases projected additional oil and gas revenues nearly fivefold, to 2.74 trillion from the previously estimated 527.6 billion.
Inflation also looks to be currently contained which is good news for Russian consumers who have seen prices rise significantly since the recession began in 2014. The Finance Ministry lowered its projected inflation levels, to 2.8% from the previously expected 4%. The Russian Central Bank earlier said that inflation was expected within the interval of 3-4% this year and at about four percent next year, added TASS.
The additional revenue will very much ease economic pain in the Russian Federation due to budget cuts over the last few years as military spending crowded out social priorities. Schools, education, hospitals, and healthcare were all given a backseat to the conflict in Syria.
Russian President Vladimir Putin was just given a mandate for another six year term and he has pledged large economic reforms and expenditures. This budget windfall will give him the monetary room to enact some of the changes.