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Putin: Russia will have to cut budget expenditure over low economic growth

September 02, 2013, 10:53 UTC+3
The decline in the growth rate of the global economy and the fact that the Russian economy is following the tendency make the Russian government cut state budget expenditure
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The decline in the growth rate of the global economy and the fact that the Russian economy is following the tendency make the Russian government cut state budget expenditure. President Vladimir Putin acknowledged the need for this measure on Sunday, the Nezavisimaya Gazeta daily reported.

The budget will receive fewer revenues than was forecast, respectively, state capabilities to fulfill the previously assumed financial liabilities are on the decline, the Russian president said.

The current scheme of ‘budget maneuver’ for next three years envisages a lower spending on the human capital and investment. The funding of the law enforcement agencies and the defense industry remains the top priority, though it is mostly inefficient in terms of a positive influence on the economy, the Kommersant daily reported.

The statement of the president was reflected in a budget strategy project of the Finance Ministry up to 2030, the Nezavisimaya Gazeta daily reported. The ministry proceeds from an assumption that the state revenues and state expenditure will be falling. The reason for this tendency is a reduction in the world oil prices predicted in 2016 that envisions the reduction of budget revenues. Meanwhile, if the oil prices will be falling for a long period of time the Russian government will have to unseal the National Reserve Fund.

The domestic problems are prioritized for Russia, Director of the Institute of Economics, Russian Academy of Sciences, Ruslan Grinberg believes. “The situation in the United States, the European Union and China points to a higher business activity. Our economy is slowing down. Probably we are sliding down in a stagnation or recession, but it is not linked with the world economy,” the Nezavisimaya Gazeta daily quoted Ruslan Grinberg as saying. “An unlucky combination” has emerged in Russia, as private investment reduced, but the lack of confidence in tomorrow increased and the property right was questioned again, he noted. The capital flight from Russia has doubled at this background. Grinberg does not take the presidential proposal to tighten the belts over the funding of the state liabilities timely. According to the general rule during the stagnation or recession this is the state authorities that should stimulate the economy investing actively in different projects. The government can increase the tax revenues, dealing with the offshore companies or cancelling the taxation flat scale.

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