A PRUDENT BUDGET….
Recession still stalks much of the world, but it looks like good times in Moscow. Real growth in 2001 will come in around five percent, despite falling oil prices. Growth was strongest in areas that make a difference in the daily lives of ordinary Russians–agriculture, retail trade, residential construction. Analysts searching for the source of President Vladimir Putin’s continued popularity need look no further.
But growth slowed in the fourth quarter, and the government’s forecast of 4.3 percent growth in 2002 could be high if oil prices stay soft. Inflation remains disturbingly high, close to 19 percent. And capital flight continues at perhaps $1.5 billion per month.
So the government was wise to propose a cautious budget with a fiscal surplus and a hard-times reserve. That budget sailed through the Duma and the Federation Council last month, and the president signed it into law last week.
The budget calls for 2.1 trillion rubles ($68 billion, 28 percent of gross domestic product) in revenues and 1.9 trillion rubles ($62 billion, or 26 percent of GDP) in expenditures.
What Russia’s government spends in a year, the United States government spends in two weeks. United States federal budgeted outlays for fiscal year 2001 were $1.8 trillion, 26 times bigger than Russia’s planned outlays but only about 18 percent of U.S. gross domestic product.
Russia’s budgeted expenditures break down as follows:
–Social policy: 430 billion rubles ($14.3 billion)–Debt service: 285 billion rubles ($9.5 billion)–National defense: $284 billion rubles ($9.4 billion)–Transfers to subfederal governments: 265 billion rubles ($8.8 billion)–State security and law enforcement: 174 billion rubles ($5.8 billion)–Education: 80 billion rubles ($2.7 billion)
If revenue falls significantly below projections, officials say the state may postpone expenditures, increase debt (including foreign debt) and/or renegotiate debt-service payments. If revenues exceed projections, officials say they plan to build reserves.