Draft budget for 2014-2016. FBK’s view

On 4 July Igor Nikolayev, FBK Institute of Strategic Analysis, Director, spoke at the round-table of “Draft budget for 2014-2016” at the RIA Novosti multi-media press center. 

According to I. Nikolayev, criticism and complaints about the draft budget for 2014-2016 will only increase. “The current budget contravenes the Budgetary Code, because the most essential macro-economic indices - the GDP dynamics and inflation – are not reliable,” the analyst is sure. “In other words, the budget proceeds from an unrealistic GDP prediction and thus contravenes one of the fundamental budgeting principles. It proceeds from the fact that in 2014 the GDP growth will be 3.7%, but the economy is slowing down. Ministry of Economic Development of the Russian Federation estimates the annual growth in May as 1%. I do not know what should happen to improve the dynamics significantly by the end of the year”. In the expert’s opinion, if the economy continues to grow at zero rates next year, the budget will receive at least 500 billion roubles less in revenues, and the deficit will be about 1-1.5% of GDP instead of the officially forecast. Besides, the privatization plans will hardly bring the expected proceeds.

The economist pointed out that the Government has irreducible obligations, such as, for example, provision of rehabilitation equipment for disabled people, and it will be difficult to fulfill the obligations in the current situation.   “I do not see any other way out but to shift the budget priorities towards social expenditures,” he emphasizes. In the opinion of Igor Nikolayev, “Reserve Fund is the first source we will be able to use in order to cover the arrears of revenues.”  The analyst reminded that the fiscal burden will grow: extra rates of assessment are intended for the workers of harmful industries, for some categories of citizens privileges will be cancelled, etc. “Against the background of sliding into a recession one should do exactly the opposite: reduce the fiscal burden”, explains the expert. 

Also, in the round-table discussion took part Natalia Akindinova, HSE RI “Development Center”  Institute Director, Vladislav Onishchenko, the first deputy head of the analytic center under the RF Government, Tatiana Tishchenko, the E. Gaidar Institute of Economic Policy, senior staff scientist of the budget policy laboratory, Maxim Safonov,  RANEPA, Finance and Banking Faculty, Chair of finance, monetary circulation and credit, associate professor.