Page 12 - RusRPTApr24

A victory for Putin was never in doubt but the margin came as a slight surprise and voter turnout was up sharply from 66.5% in 2018 to more than 77% (which beat the previous record in 1991, of 75%). It’s hard to know how much we should read into Putin’s vote share and the high turnout figures, but Putin will likely sell this as showing strong support for his rule.
Among the things to watch now will be Russia’s strategy in the war in Ukraine. In his post-election speech on Sunday night, Putin said that the main goals of his next six years include the special military operation and strengthening the country’s defence capabilities. The war is popular in Russia but mobilisations of the population are not and the wide election victory could embolden Putin to step up the military effort.
As we argued in our Focus, we think it is likely that Russia devotes more resources to the war effort now that the election has passed. The government has set out plans to raise military spending fairly sharply this year and military experts have warned about a possible stealth mobilisation, whereby soldiers are recruited and trained without an official call up like that which was announced in September 2022.
Another related area to watch concerns the economy and fiscal policy. Putin used his annual State of the Nation address in February to emphasise the government’s social support, including subsidised mortgages, and to announce a new national project called ‘Family’, which will focus on poverty reduction and boosting birth rates. Putin also hinted at a fairer distribution of the tax burden by raising taxes on wealthy individuals.
These are important initiatives but from a near-term fiscal perspective, the big thing to watch is whether the government pushes through unpopular non-war fiscal tightening to accommodate higher military spending. Loose fiscal policy has contributed to an overheating economy, widespread supply shortages and higher inflation in the past year, which the central bank has tackled by raising interest rates from 7.50% to 16.00%.
We’re inclined to think that the government will use various levers available to keep a grip on non-war and non-social spending and raise taxes on profitable businesses, so that the budget deficit remains manageable at 2-3% of GDP in the coming years. This still fairly loose fiscal stance will keep GDP growth strong into 2025 and inflation above the central bank’s target. But if this non-war fiscal tightening doesn’t materialise, we think there’s a bigger risk of sharp falls in the ruble and much higher inflation in the coming years.
A final area to watch is whether there any changes in positions of power close to Putin, which could give an indication of how the political landscape could develop during Putin’s fifth term. After Putin is officially inaugurated as President in May, the government is legally required to resign and the president announces a new one. Mikhail Mishustin is viewed as a safe pair of hands as Prime Minister and he could retain his role, but past elections have resulted in re-shuffles and other ministerial positions are likely to change.
There are rumours that young technocrats will be ushered into positions of power and Putin’s inner circle. The son of Nickolai Patrushev, Dmitry, was given a promotion in 2018 and could be appointed deputy PM. Putin has
12 RUSSIA Country Report April 2024 www.intellinews.com