BOFIT Weekly Review 2016/30
Russia prepares for serious budget tightening
The government earlier this month gave its initial approval to the 2017–19 federal budget framework. Finance minister Anton Siluanov said the budget revenue forecast was based on a fairly cautious assumption of $40 a barrel for Urals-grade crude oil and 2017 revenues would drop slightly even in nominal terms.
The federal budget deficit next year would be limited to slightly over 3 % of GDP (about the same as estimated for this year). Thereafter, following instructions by president Vladimir Putin, the target is the deficit would shrink by one percentage point of GDP annually.
Siluanov noted that the starting point for federal budget spending is this year’s targeted nominal sum, after cuts from the budget approved last winter, which would remain the same in coming years. This would mean a further downward slide of government spending in real terms, even if spending has already declined by roughly 10 % over the past year and a half. Siluanov added that the government is set to safeguarding entitlements related to pensions and other social benefits, as well as public sector wages. He expects cutting budget spending in other categories will be an exceptionally challenging task.