Russia's extremely conservative spending in 2021 will hamper economic recovery from the pandemic.
Cutting costs will take away from GDP up to 1% growth next year, according to Oxford Economics. In
Russia, government spending on overcoming the COVID-19 pandemic and the economic crisis caused
by it in 2020 lagged behind the leading countries of the world, and in 2021-2023, large-scale support for
economic growth through government spending is not expected. Alfa Bank economists also pointed out
last week that the planned tightening of fiscal policy is a factor for cautious assessments of the
prospects for economic growth in Russia in 2021: the bank's forecast is 2.5% growth next year,
compared with the forecast of the Ministry of Economic Development of 3.3%.
The Ministry of Economic Development and Trade reported that the forecast of the socio-economic
development of Russia for 2021–2023 takes into account the reduction in budget spending next year.
The transition to fiscal consolidation could restrain the recovery pace of the Russian economy after the
pandemic crisis.
The chosen budgetary strategy will not allow to stimulate a faster recovery in the most affected sectors
of the economy and thus quickly overcome the consequences of the 2020 crisis. The government plans
to cut nominal budget spending by 5% in 2021, or by 1.1 trillion rubles. At the same time, an increase in
non-oil tax collections will give the budget an additional 1 trillion rubles next year, including about 500
billion rubles from the end of the tax break announced this year.
Russia's GDP has been contracting (quarter-on-quarter at constant prices) since mid-2019, in line with
the technical definition of a recession. Recovery growth should begin in 2021, which will be
superimposed by budget cuts. Economic growth can be supported by the fact that the spending of the
budgetary system under the section “National Economy” in 2021 will remain at the increased level of
2020 (5.1% of GDP). Expenditures of the economic bloc have the highest fiscal multiplier during normal
growth; it follows from the estimates of the Bank of Russia.
Source: www.rbc.ru
