Russian Prime Minister Vladimir Putin’s campaign pledges before next month’s presidential vote will raise government spending by 4.8 trillion rubles ($161 billion) through 2018, Capital Economics said.
Spending will rise as much as 5 percent of economic output in that period, Neil Shearing, chief emerging-markets economist at the London-based research company, said in an e-mailed note.
Putin, 59, who is facing unprecedented protests against his 12-year rule as he seeks a new Kremlin term, has stepped up efforts to court voters. Russia will spend 23 trillion rubles in the next decade on upgrading its military, Putin said yesterday. He has also promised to refrain from raising the retirement age and to increase pensions and state wages.
While Russia’s public debt is low at 10 percent of gross domestic product, meaning there’s some scope for the government to fund additional spending through increased borrowing, the “non-oil” budget deficit would increase to about 15 percent of GDP, if the pledges are fully implemented, Shearing wrote.
This would push up the oil price Russia needs to balance its budget to $130 per barrel from $117 per barrel at present and about $55 per barrel in 2008, according to Shearing.