Page 21 - RusRPTApr21

was from the federal budget versus 49% in 2019.
Federal spending increased by 25% in 2020 compared to 2019, mainly due to additional anti-crisis spending by the government by at least RUB2.9 trillion. The consolidated budgets of the regions grew by 15%, mainly due to an increase in health care costs, RBC notes, citing data from the Federal Treasury.
If we compare spending in different years as a percentage of GDP, then expanded government spending in 2020 (39.5% of GDP) is second only to the indicator of the crisis year of 2009, when spending was the maximum for post- Soviet history of 41.4% of GDP. But it is worth remembering that then the Russian GDP collapsed by 7.8%, and in 2020 the country's economy fell by only 3.1%, which proportionally makes the share of spending as a percentage of GDP bigger.
Russia's budget spending as a percentage of GDP in recent years looks modest in comparison with European countries. For example, France spent at least 55% of its GDP in 2017–2019, and Finland at least 53%, while Russia spent 33–35.3% of GDP on government spending in these three years.
Russia’s restrained budget spending is in part also due to its anticipation of new Western sanctions, which began in 2014. In order to preserve large reserves, which insulate Russia from the impact of sanctions, the government has in effect been running an austerity programme since the annexation of Crimea. While that has allowed the Kremlin to shrug of any sanctions threat and maintain a tough stance in talks with the west, it has come at the cost of slow growth and slowly decaying real incomes for regular Russians.
According to the chief economist of BCS Vladimir Tikhomirov, it is the limitation of budget expenditures that directly affects the real disposable income of the population. “In our country, a fairly large part of the workforce belongs either to state employees or to civil servants, 40-50% of the workforce is directly or indirectly connected with the state,” he explained to RBC as cited by The Bell.
What does it matter to me? Starting this year, government spending should gradually normalize, although the Finance Ministry plans to spend more than the budget rule would allow in normal times. The question is more likely in the structure of future expenses than in their value, and here we can count on some changes in the approach of the state, which back in 2018 announced a course towards increasing human capital.
Outlook for budget revenues improving
And thanks to rising oil and commodity prices the government is going to have more money than anticipated in the 2021-2023 budget available to spend in 2021.
What is not clear is what the government will spend this money on. The state has already announced a programme to increase investment into infrastructure, but it also likely to use part of the windfall income to reduce its planned borrowing for this year.
Russia has in years past been able to boast of a double surplus. That fell by the wayside last year, but now the double surplus – current account and trade
21 RUSSIA Country Report April 2021 www.intellinews.com