Russia: Expansive budget for 2010 and beyond
Overview:
The government has indicated that it plans to run large budget deficits in the 2010-12 period. While there is some intended fiscal consolidation, the budget deficit for 2010 in particular remains very large. During a sharp economic contraction it is inevitable that the fiscal deficit will rise (via the combination of automatic stabilisers and discretionary fiscal stimulus). Nor is it surprising that the fiscal reserve should be run down somewhat to finance this larger deficit. However, these plans imply the risky strategy of completely exhausting the fiscal reserve next year. The administration appears to lack the political resolve to cut the level of overall expenditures in line with lower revenues. It has perhaps grown used to being able to buy off key political constituencies on the back of very rapid expenditure growth.