SERGEI DROBYSHEVSKY: BUDGET CONSOLIDATION HAS RESULTED IN THE REDUCTION OF FEDERAL BUDGET EXPENDITURES
Sergei Drobyshevsky, Academic Director of the Gaidar Institute for Economic Policy discussed Russia’s economic policy with the Expert magazine.
The budgetary equilibrium undermined by a drop in oil prices in 2014 and western sanctions was restored through tough cutting of expenditures, that is, “budget consolidation”, the Expert magazine reports.
"The result of budget consolidation was a 2.5-3 p.p. of GDP reduction of federal budget expenditures fr om 19%-20% of GDP to 16.5%-17% of GDP and, consequently, the deficit of non-oil and gas budget of the Russian Federation from 9%-10% of GDP to 6%-6.5% to GDP”, Sergei Drobyshevsky notes. “So, the level of federal budget expenditures and the non-oil and gas deficit were brought in harmony with a lower level of oil prices at which the budgetary equilibrium is maintained. If in 2012-2014 the budgetary equilibrium was ensured at the price of oil of $90-$100 per barrel, at present the comfortable level of oil prices in terms of the budget amounts to $40-$60% per barrel. “This is in line with the existing consensus of opinions as regards the level of oil prices in the mid-term prospect. In Western Europe, the consolidation was carried out earlier in 2008-2012, but in most countries the extent of it did not exceed 2 p.p.-2.5 p.p. of GDP. An exception is the countries which experienced a budget crisis -- Iceland, Greece, Portugal, Ireland, Latvia and Cyprus -- wh ere the extent of the budget consolidation was equal to 5 p.p.-6 p.p. of GDP”, the expert says.
Also, Sergei Drobyshevsky presented his views on the issue why national projects of the 2018 version would not become drivers of economic growth.
"The delay of national projects is caused sooner by institutional factors, such as unpreparedness of the state authorities for actual elaboration and the start of implementation of national projects as well as their unwillingness to take responsibility for possible problems which may arise in the course of implementation. In terms of the budget policy, the “delayed start” of national projects has become an additional factor which is behind the extension of the budget consolidation", Sergei Drobyshevsky notes.
"The result of budget consolidation was a 2.5-3 p.p. of GDP reduction of federal budget expenditures fr om 19%-20% of GDP to 16.5%-17% of GDP and, consequently, the deficit of non-oil and gas budget of the Russian Federation from 9%-10% of GDP to 6%-6.5% to GDP”, Sergei Drobyshevsky notes. “So, the level of federal budget expenditures and the non-oil and gas deficit were brought in harmony with a lower level of oil prices at which the budgetary equilibrium is maintained. If in 2012-2014 the budgetary equilibrium was ensured at the price of oil of $90-$100 per barrel, at present the comfortable level of oil prices in terms of the budget amounts to $40-$60% per barrel. “This is in line with the existing consensus of opinions as regards the level of oil prices in the mid-term prospect. In Western Europe, the consolidation was carried out earlier in 2008-2012, but in most countries the extent of it did not exceed 2 p.p.-2.5 p.p. of GDP. An exception is the countries which experienced a budget crisis -- Iceland, Greece, Portugal, Ireland, Latvia and Cyprus -- wh ere the extent of the budget consolidation was equal to 5 p.p.-6 p.p. of GDP”, the expert says.
Also, Sergei Drobyshevsky presented his views on the issue why national projects of the 2018 version would not become drivers of economic growth.
"The delay of national projects is caused sooner by institutional factors, such as unpreparedness of the state authorities for actual elaboration and the start of implementation of national projects as well as their unwillingness to take responsibility for possible problems which may arise in the course of implementation. In terms of the budget policy, the “delayed start” of national projects has become an additional factor which is behind the extension of the budget consolidation", Sergei Drobyshevsky notes.