The squeeze on Russia’s budget and current account positions has eased over the second half of this year, largely thanks to a rise in oil prices. Higher energy revenues next year should help to limit the impact of a surge in military spending on the fiscal and external positions. Even so, a large fiscal stimulus is coming ahead of next year’s election and at a time the economy is clearly overheating, which will add to inflation pressures and require additional interest rate hikes from the central bank.
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