The Russian government adopted a three-year budget marked by spending cuts and a tariff freeze at state monopolies even as the central bank said the underlying economic-growth forecasts were too optimistic.
The main risk for the budget, based on a forecast of 3 percent gross domestic product growth next year, is banks not lending enough to companies and state monopolies reducing investments after a 2014 freeze in state-regulated tariffs, Economy Minister Alexei Ulyukayev said at the Cabinet meeting today.
The world’s largest energy exporter’s economy is growing at the slowest pace since a 2009 recession as weak global demand depresses exports and investment. The government is freezing the pay of public workers next year and plans to increase dividends from state-owned companies starting in 2015.
“The budget turned out to be strict,” Prime Minister Dmitry Medvedev said at the meeting in Moscow. “A lot has to be done to turn this forecast into reality.”
The budget shortfall will be 0.5 percent of GDP in 2014 and 1 percent in 2015, exceeding earlier estimates as slower growth curbs revenue from taxes and state asset sales, the Finance Ministry said yesterday. The non-oil deficit will shrink to 8.4 percent of GDP in 2016 from 9.4 percent next year, it said.
GDP growth will accelerate to 3.1 percent in 2015 and 3.3 percent in 2016, according to Finance Ministry forecasts. The ministry cut its estimate for this year’s expansion to 1.8 percent from the previous 3.7 percent.
Bank Rossii Chairman Elvira Nabiullina said an increase in household tariffs next year agreed by the Cabinet will add 0.5 percentage point to the inflation rate, while she called Economy Ministry projections for investment and inflation “optimistic.” The central bank, which is targeting inflation of 4.5 percent, would need to tighten monetary policy if households are excluded from the tariff freeze, she said in Moscow today.
Companies such as OAO Russian Railways object to the tariff plan, with the rail monopoly saying a 2014 freeze on its freight charges would prompt it to cut its investment program by 75 percent.
The budget is based on oil-price forecast of $93 a barrel next year and $95 in 2015-2016, Finance Minister Anton Siluanov said today, according to state news service Interfax. Inflation is forecast at 5 percent next year and 4.5 percent in 2015-2016, he said, according to Interfax.