Translated material
Optimism deficit
Economists are ahead of the government in the race of gloomy predictions
Against the background of the constant growth of official forecasts for the 2010 budget deficit, the expert community is making even more alarmist assumptions. The Center for Economic Research of the Institute of Globalization and Social Movements (IGSO), known for its anti-globalist and socialist views, made its own forecast for the Russian budget deficit in 2010 - the shortage of funds next year could reach up to 20% of GDP.The institute's experts base their opinion on official data, finding evidence in the latest forecasts that the unpleasant trend of deficit growth will continue in the near future. Despite all the hopes of officials, “in reality, there are no objective conditions for improving the financial condition of the state,” experts say in a message on the institute’s website. GDP will continue to fall, and revenues to the treasury will decrease significantly; the result of these processes may be a simple failure to fulfill the budget as planned.
The government itself no longer remembers the promises made back in April to keep the budget deficit in 2010 at the level of 5%, and in 2011 no higher than 3%. Let us recall that according to the latest amendments announced by the Ministry of Finance at a government meeting last week, in 2009 the excess of revenues over expenses will amount to 3.617 trillion rubles, which, if GDP falls to 8.5%, could amount to up to 9.4% of the gross product. At the same time, treasury revenues are expected in the amount of 6.561 trillion rubles, or 17.1% of GDP, and the maximum amount of spending is still fixed at 9.771 trillion rubles. (25.4% of GDP). Previously, the ministry submitted to the government the forecast parameters of the 2010 budget: federal budget revenues - 6.636 trillion rubles, or 15.7% of GDP, expenses - 9.822 trillion rubles. (23.2% of GDP). At the same time, the estimated size of the deficit - 3.187 trillion - is still within 7.5% of GDP. “Even within the current economic situation, this figure does not look convincing. It remains clearly underestimated, although officials have repeatedly raised it in their forecasts,” says Boris Kagarlitsky, director of the IGSO, assessing the economic prospects as exclusively negative. According to the economist, reducing the deficit in 2010 relative to the current year will require, first of all, a radical reduction in spending.
Vasily Koltashov, head of the IGSO Center for Economic Research, adds: “The authorities expect to keep spending in 2010 almost at the 2009 level; they do not take into account that the crisis is preserving development. Russia’s GDP will decline significantly before the end of the year, the process will continue in 2010, treasury revenues will fall sharply, and the deficit will be enormous.”
According to the institute's experts, the industrial decline in the country will not stop for the next two years, and it will probably intensify next fall. The government, in turn, plans GDP growth within 1% in 2010.
Despite all the statements, primarily by the top management of OPEC, about the impending rise in energy prices, according to IGSO analysts, the end of the crisis and global financial stabilization should lead to a decrease in prices for hydrocarbons, metals and other raw materials. In this case, not only the profitability of Russian exports will fall, but also its physical volumes. “The ruin of small and medium-sized enterprises will continue. The country will meet 2010 with poor economic indicators,” experts gloomily predict in an official publication on the institute’s website.
The Vremya Novostey newspaper has already noted that the level of budget revenues for 2010 planned by the Ministry of Finance is insufficient to fulfill social obligations . IGSO analysts express the same opinion: “Execution of the budget, despite the attraction of borrowed funds, a significant increase in tariffs and excise taxes, will turn out to be extremely difficult. The authorities will obviously move on to budget sequestration. Cutting social spending will lead to a further reduction in consumer demand in the country and will worsen the crisis. Already in the current conditions, there are no plans to increase public sector salaries and unemployment benefits. A new, more acute banking crisis can be expected in 2010. The collapse of the automobile industry may be followed by the collapse of other sectors of the economy. Unplanned spending can deplete the government's foreign exchange reserves despite efforts to conserve them. All this will make the state budget unattainable as planned.”
Perhaps such gloomy forecasts may seem exaggerated to some. But we can remember that at the beginning of this year the government itself expected a fall in GDP of no more than 0.2%, but now we are talking about a 6-8.5% decline - a difference of 30-40 times. In this light, almost any predictions do not seem utopian.