Fitch sees Russia’s budget deficit at 3.9% of GDP 2016, 2.8% 2017

MOSCOW, Sep 20 (PRIME) -- International rating agency Fitch expects Russia’s federal budget will stand at 3.9% of gross domestic product (GDP) in 2016 and 2.8% of GDP in 2017, the agency said in a statement Tuesday.

“We think budget tightening measures will be less aggressive than in 2014–2015 and there are implementation risks ahead of the March 2018 Presidential elections. We forecast a federal government deficit of 3.9% of GDP in 2016 and 2.8% in 2017,” Fitch said.

Russia’s Finance Ministry projects the budget deficit at 3.3% of GDP in 2016 and at 3.2% in 2017. The country’s central bank expects the budget deficit at 3.6% of GDP in 2016.

“The Russian government's fiscal plans will be an important focus of our sovereign rating assessment following Sunday's parliamentary elections…The vote sets the stage for the reintroduction of a medium-term fiscal framework and formal fiscal rule that should detail how the government plans to balance the budget,” the agency said.

The agency said Russia’s government is sensitive to popular disenchantment over fiscal consolidation that was introduced in response to lower oil prices. “Suspending the three-year fiscal framework last year…gave the government flexibility to respond to popular concerns, although fiscal policy was not loosened significantly in the run-up to the election,” Fitch said.

“We think significant fiscal savings are achievable, although some measures, such as further pension and social payment reforms, lower subsidies and higher income taxes, would have social costs. Discussions about a new budget rule, which would save oil revenue when prices are above a certain level, may also resume,” the agency said.

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