Demand creates mitigation
That the Finance Ministry may soften its policy of fiscal austerity for the next three years, in his review yesterday pointed out the chief economist of Alfa Bank Natalia Orlova and analyst at Bank of Valery Volgareva. According to them, the influence it can weak recovery of consumption. Retail trade turnover, according to Rosstat, in the first ten months of this year declined by 4.4% compared to the same period last year. It is falling has increased compared with September, when turnover fell by 3.6%. This means that the state may have to support private demand additional costs.
But not only problems with the dynamics of demand for goods and services may affect the implementation of the budget. Alfa-Bank pays attention that the requirement of President Vladimir Putin not to raise taxes in the next three years could complicate the fiscal consolidation and preparation for the introduction of a new budget rule 2020 (includes limiting budget expenditure income with oil at $40 minus the cost of servicing the debt. — ).
The analysts ‘ fears and cause the words of Prime Minister Dmitry Medvedev as his statement at the meeting of the faction “United Russia” in the state Duma, it follows that in the case of additional incomes in the budget of the authority can direct them to additional costs. “These statements promise optimism about the return of consumer growth model in Russia, but they also point to the potential inflationary risks in the future” — written Orlov and Volgareva.
“Extremely difficult” budget
The budget deficit in 2017 should reach 3,2% of GDP in 2018 and 2.2% and 1.2% in 2019 (subject to annual capitalization of VEB). Due to the sharp fall in budget revenues in the last time “to enter such parameters [on the deficit] will be extremely difficult,” said a source in the Ministry of Finance. Two sources told Reuters that the presidential election of 2018, marginal costs and the deficit can increase. So, according to the employee of the Russian government, the budget for the next three years is technical in nature and subject to revision. Another official familiar with the budget planning, reported that the plan for 2017 is more or less realistic, what can be said about the parameters 2018-2019.
How may increase costs in comparison with the plan, illustrates the budget situation this year. In 2016, the expenses, according to the Finance Ministry (.pdf), will grow by 534,7 billion rubles compared with the approved last December.
Assistant Finance Minister Svetlana Nikitina said that the budget parameters, in particular limit the amount of spending is “the position of the first reading,” in which the budget has been adopted. Thus, they cannot be revised, she said.
A political decision
Fears of experts of alpha Bank agrees Alexandra Suslina of the Economic expert group. The expenditure budget is a political decision, she said, and the success of fiscal consolidation will depend on those who make these decisions. “If the highest of persons, there is an understanding that consolidation is necessary to continued survival and acceptable operation of the budget system, then they will not allow strong growth of expenditures in the current three-year, despite elections and lobbying,” says Suslina.
The cost-savings are not easy, but the goal is the size of the budget deficit is achievable, says head of the laboratory of budget policy of the Institute Yegor Gaidar Arseny Mamedov. “In the budget the price of oil is set at $40 per barrel, and if it is higher, as is predicted by most international organizations and investment banks, we will get more oil and gas revenues. This will allow to increase expenses and to maintain a target level of deficit. Such a scenario is quite probable,” — said Mammadov. Despite the conservative oil price, there is a risk to receive less income, coupled with the risk of cost overruns the Treasury, does not agree with him Suslin.
“The budget includes a fairly optimistic dollar (RUB to 67.5 in 2017. — ) — if the ruble will be stronger, there will be a shortfall of revenues. Moreover, the budget includes optimistic assumptions on the collection of VAT and the standard of payments of dividends from state-owned companies,” she recalls. The government this year raised the bar on dividend payments by state companies to 50% of net profit (under RAS or IFRS — from the larger figure), but in practice the rule never worked. In particular, “Rosneftegaz”, “Gazprom” and “Transneft” has managed to pay less than 50% of the profits, through various studies.
A sufficiently large reduction is planned in part of defense spending, reminds Mammadov. “The big question is, how do manage to cut them, given the parameters of the amendments to the budget this year, when defense spending was increased compared to planned. There is a lack of clarity about intervention in Syria — when it will end and what it will take funding,” he muses. It does not agree with Alexander Suslin: the Ministry of Finance alone could not make the decision to reduce spending in this area. “Spending on defense and security — absolutely politicized and hidden. So if the Ministry of Finance lays that can reduce the costs, then the decision at a higher level about how to reduce funding,” she said.
To demand more
The first decision, which will increase some budget expenditures, was received by President Vladimir Putin: after the introduction of the draft in the Duma, he ordered a lump sum payment of 5 thousand. not only civil but also military retirees. In response to the decision in the budget was required to seek additional 10.3 billion rubles., said two people in the government. However, this does not mean that you have to increase the maximum amount of costs agreed by the government, representatives of the Ministry of Finance said in the Duma that the budget is or will be found reserves.
To increase budget expenditures require and state Duma deputies. In a decision issued on 18 November in the first reading of the draft budget, they instructed the budget Committee and the government to consider spending a total of 25 destinations. In particular, more budget funding, require health care, education, small business and industry, parliamentarians. The second reading of the budget, which is scheduled for December 7, they expect the government “substantial increase” appropriations, which will be issued to the regions in budget loans. The government proposed a serious reduction of this form of support of regional budgets: the project budget for the entire next three years provides for only 250 billion rubles of budget loans, whereas only one 2016 388 billion rubles.
Any additional funding is expected in the Duma, in its ruling, is not said; not spoken about specific amounts and necessary deputies. The government has found reserves for additional funding of certain members of the priorities, assured during the discussion of the draft budget in the Duma, Finance Minister Anton Siluanov. To cut funding for any budget in order to increase the priority, the deputies are not asked. In the draft budget for 2017 provide for reservation of budget allocations to 370 billion rubles, follows from the conclusion of budgetary Committee of the Duma, of which 100 billion rubles can be allocated to General economic questions on government decisions.