Putin Is Afraid to Boost Government Spending

Russia, which has the biggest budget surplus among major economies, will loosen its purse strings – but only very slightly. The government’s proposals to cautiously increase spending over the next three years are unlikely to solve President Vladimir Putin’s political problems.

Tight fiscal policies are falling out of fashion around the world. In Russia’s immediate neighborhood, budget surpluses are increasingly frowned upon. The European Central Bank is exhorting euro area governments to spend more to counteract a slowdown in growth. The Netherlands is clearly listening: It’s about to pass a stimulus budget for next year. The German government is under heavy pressure to spend more to ward off a recession. In eastern European countries that are not euro members, the ones with more expansionary fiscal policies appear to be enjoying stronger economic growth. The Czech Republic recently approved a draft 2020 budget that promises significant spending increases. On Russia’s eastern border, Japan is going for more stimulus next year. Financial resources are cheap and trade wars are creating risks for growth. Trying to boost domestic demand through increased government spending makes sense.