Russia to follow ultra-cautious and prudent savings strategy
In the next three years, the Russian government is going to make every effort to refill the National Wealth Fund (NWF). The Ministry of Finance expects that extra revenues from high oil prices, increased oil industry taxes and value added tax alongside with other changes will almost quadruple the size of the NWF by 2021.
Russia's drive to fill state coffers is prudent but will come at the expense of economic growth, says Reuters citing economy experts. The Ministry of Finance aims to increase the size of the NWF to 14,2 trillion rubles ($216,1 billion) or 12% of GDP in 2021. The reserves will be replenished by means of a so-called ''fiscal rule'', under which any revenue from oil prices higher than $40 per barrel goes into the NWF. Besides, the Kremlin has also revised oil industry taxation, raised value added tax and increased pension age.
The savings strategy set out in a 2019-2021 budget plan is fiscally ultra-cautious and prudent, but it also prioritises stability over development, analysts consider. It reduces chances to reach President Putin's goal of joining the world's top five economies by 2024. ''Our reserves are going to grow quickly, but at the same time, there will be less money that could be used to renew the economy,'' commented Chief Economist at BCS brokerage Vladimir Tikhomirov.
''It's a really tough budget policy,'' considers Aleksandra Suslina, an economist at Russian Economic Expert Group. ''There is no leniency here, no sense that a bright future awaits us except in a macroeconomic forecast.''
Next year, Russian authorities plan to run a budget surplus of around 2 trillion rubles, said Chairman of the State Duma's Committee on Budget and Taxes Andrey Makarov. He added that such a policy would allow Russia to put aside enough money to protect the economy from any external shocks caused by oil market volatility or potential sanctions. In 2014, the Central Bank spent a third of the country's reserves in order to mitigate the impact of sanctions imposed by the West.
Although Makarov ensured that all of the government's social obligations would be met, it is still unclear how numerous development projects will be funded. Earlier, the government announced its intention to borrow money to fund new development rather than dip into the NWF.
Russia's credit ratings are expected to benefit from the Kremlin's tough policy. Last week, Moody's rating agency said it might lift the country's sovereign credit rating to investment grade in 2019 if Moscow keeps tight fiscal control.