Min: Budget deficit to fall to 1% of GDP from 4.4% in 2020–2022
MOSCOW, Sep 16 (PRIME) -- The Finance Ministry expects the deficit of Russia’s budget to stand at 4.4% of gross domestic products (GDP) in 2020 and to shrink to 2.4% of GDP in 2021 and to about 1% in 2022, Minister Anton Siluanov said on Wednesday at a government meeting during consideration of the 2021–2023 federal budget.
“In our forecasts, we are gradually reducing the budget deficit that will contract from 4.4% of GDP this year to 2.4% of GDP next year, and we will reach the trajectory of about 1% deficit for the period from 2022,” he said.
Budget spending should grow in 2021–2023 as compared with pre-crisis plans both in relation to the GDP and in nominal figures, he said, adding that the budget policy in 2020–2021will be focused on fighting the coronavirus pandemic and its consequences.
“I would like to point out that the budget policy in 2020 and in 2021 should be focused in the first place on cooperation in the fight with the pandemic and its consequences. We are implementing several packages of measures with the scope of helping citizens and businesses, and they cost about 5% of gross domestic product,” he said.
He also said that the ministry plans to cancel inefficient exemptions on mineral extraction tax (MET).
“We plan to raise the return from sectors connected to commodity industries of our economy. The issue is about cancelling inefficient MET exemptions,” he said.
CONDITION OF ECONOMY
Prime Minister Mikhail Mishustin said that the Russian economy managed to walk a sharp edge between the coronavirus pandemic, low oil prices, and sanctions.
“Epidemiologic risks were added to the acting sanctions against our country and low oil prices. In the end, we managed to walk a very sharp edge where we had to balance while solving the most important tasks of fulfilling all social liabilities of our state and of bringing our economy to the growth dynamics and of developing the country. … The entire array of measures that we had to fight the coronavirus and the economic crisis were entirely justified,” he said.
It is important to spend budget finances efficiently under tough conditions. The government managed to find new reserves and some inefficiently spend money and to use them to solve problems of people during the crisis. The government has to prevent inefficient spending in the next three years.
Regarding the tax plans, Mishustin said that Russian authorities ensure fulfillment of social liabilities first, so not only oil companies should bear the burden. The new tax bills, including an increase of excises on the tobacco products higher than inflation, ensure that. The government also plans to raise taxation of other sectors, modify the added income tax for hydrocarbons, raise payments for utilization of natural resources, and revise some tax exemptions for the oil industry, he said.
At the same time, healthcare will remain free in Russia, including hi-tech healthcare, he added.
He also said that the government dynamics of incomes of citizens and of employment to switch back to growth next year.
INFLATION, RUBLE, LABOR
Economic Development Minister Maxim Reshetnikov told the government while presenting the ministry’s macroeconomic forecast that the recent increase of inflation was connected to recovery of demand.
The Federal State Statistics Service earlier registered a n increase of annual inflation to 3.6% in August from 3.4% in July.
“We managed to maintain the macroeconomic stability. In August, inflation amounted to 3.6% in annual terms, slightly higher than in previous months. But it important that the spring depreciation of the ruble did not transform into a growth of prices. A slight increase of inflation that we see is connected to recovery of consumer demand,” Reshetnikov said.
The ministry expects Russia’s gross domestic product (GDP) to fall 3.9% this year, but the pandemic crisis did not become a systemic one, as it was focused on several specific industries of small and medium-sized businesses and it didn’t hurt systemically important industries and companies, he said.
The ministry sees no significant inflationary risks for Russia until 2023, he said.
In the forecast, the authority expects conservative dynamics of oil prices as the epidemiologic situation in many countries is still unfavorable and demand for oil will grow slowly. The forecast for average price for Urals oil blend in 2020 was raised to $41.8 per barrels from $39.9.
Reshetnikov also said that the ruble was underappreciated due to fears of investors, and that its exchange rate should return to fundamental figures at the end of 2020 or at the beginning of 2021.
Investment demand in Russia should pick up in 2021, but it will reach the pre-crisis level no earlier than in 2022, he said. The ministry expects fixed capital investment to shrink by 6.6% in 2020 now, up from a 10.4% fall expected earlier.
He also said that condition of the labor market in Russia is still difficult, but it will improve. Currently, 3.7 million people are officially unemployed, but growth of the figure is slowing down. It grew by 30,000 people per day on average in May, while it slowed down to 13,000 in August.
“The situation will improve next year. The average unemployment level will stand at 5.2% this year, and it will fall below 5% at the end of the year, returning to a ‘natural’ level,” he said.