The cycle of budget cuts will last at least five years

Government spending will not begin to decline from 2017, as announced government, in fact spending budget is de facto reduced for the second year in a row, the study showed . It can be seen, if you count the indicators of the Federal budget in comparable prices of 2016. The reduction in the coming three years is even more significant if we analyze the costs, adjusted for inflation, not nominal.

“Painful way”

The study covers the period 2011-2019 years, the basis of allocations went, the average annual inflation (data for future three years are taken from the government draft budget). In past years, nominal budget expenditures grew annually similar pattern was observed in real terms (exceptions were in 2011, 2013 and 2015, when spending declined slightly). It 2015 was the most revealing: if nominal spending on its results increased by 789 billion rubles, in terms of decreased 1.6 trillion In the current year, the expenditures in real terms will be reduced to 327 billion rubles compared to the previous. From this point of view, in the forthcoming spending cuts are nothing special anymore — a real sequester continues for the second year, and the whole cycle of lower public spending in the current budget plan and will last at least five years (2015 to 2019).

Budget expenditures: in war and peace

In the current situation in Russia budget cuts, the only policy that will leave the size of the national debt at its current level and to reduce the deficit, which is of fundamental importance to the state, said the head of “Fiscal policy” the Economic expert group (EEG) Alexander Suslin. Stimulate the economy by increase in spending was possible in 2008, when Russia had large reserves, but now they are exhausted, she added. “Moreover, it is wrong to equate the volume of spending on the economy with growth. We can spend as much as you want, but it may not lead to any effect, because we have a very low efficiency,” — says the expert. Sustained low oil prices should encourage the abandonment of ineffective spending — while these programs even and taken, but it didn’t work, recalls senior research fellow, center for budgetary policy studies, Ranepa Arseny Mamedov.

The current decrease spending budget — the price paid for the mistakes of the past when the authorities unnecessarily increases the costs in the Wake of high oil prices, says a leading researcher of the Institute “development Center” Higher school of Economics (HSE) Andrey Chernyavskiy. Fiscal structure was not sustainable, he adds: “We were spending market revenues, without creating sufficient reserves in case of sharp and sustained fall in oil prices”. The budget plans of the government for the next three years — “painful way to align oil prices and budget expenditures,” says the expert.

The oil-for VAT

The structure of revenues is changing. If in past years, the contribution of commodity exports to the budget could reach and 41% (in 2011), after the fall in oil prices the situation has turned and the income from foreign economic activity fell below 20% in 2016 (in the coming three-year decline will continue). The leaders in terms of contribution to revenues out of VAT — its share is expected to reach nearly 40% by 2019, its rising power has traditionally been explained by the improvement of administration. In addition, it could affect and high inflation, says Cherniavsky.

However, tax administration is unlikely to play an important role in the growth of the share of VAT, and the reason for its high contribution lies only in the reduction of oil and gas revenues, but not in economic diversification, categorical Suslin of the EEG. Administration have helped to enhance the contribution of VAT to the budget, but the effect has been achieved, and the budget forecast for the retention of the “overly optimistic,” Mamedov stresses of Ranepa.

Survival as a priority

The main priority adopted budget — survival, and this is evident from the high share of social spending, says Suslina. Now the Federal budget and social power. The largest share in the costs traditionally is a section “Social policy” (social benefits, transfers to the Pension Fund, etc.), by 2019, these costs reached nearly 30% of the total budget. Traditionally, the high costs of military and security forces — for example, in 2013-2014, spending on “national defense” and “national security” in the aggregate does exceed 30%. But now the situation is changing, especially in terms of defense spending, which the current share of 22% in the cost structure over the next three years down to 16%. Reducing expenditure on security forces is also evident: if in 2012-2014 year, they accounted for 14-15%, now reduced to 11% for the entire three-year budget cycle.

If you have not carried out pension reform, the budget will remain social stresses Cherniavsky. However, there is no doubt that the cost of the security forces and defense will remain at the current level — for example, in late 2016, the authorities decided to Finance the repayment of debts to defense enterprises on 800 billion rubles, reminds Mammadov. Accept the budget “relatively balanced” — it’s not ideal, but other option and no indicates Suslin. Public debt in Russia is low, theoretically it would be possible to spend reserves and increase borrowing to stimulate the economy, but it carries “a significant macroeconomic risk”, said Mammadov of Ranepa. Dramatically reduce costs would be impossible, and who knows what are the conditions for loans after a few years, he explains.

But it is necessary to take into account the existing risk of inflating budget expenditures, says Cherniavsky. For example, if oil at $50 budget spending next year could rise by 5% in comparison with the plan, writes in his review dated December 7, chief economist at Alfa Bank Natalia Orlova. If the price of oil will be higher than the forecast of $40, likely will increase both revenues and expenditures, the deficit will remain at the same level, adds Mammadov. Talk about sustainable budget it will be possible only when the new budget rule (it limits the spending budget basic income with oil at $40 less in debt service costs), that is, in 2020, concludes the expert HSE Andrew Cherniavsky.