The Russian budget: Economic pain, caused by Ukraine | The Economist

The Russian budget: Economic pain, caused by Ukraine | The Economist:



"TODAY Russia submitted its budget to the Duma, the lower house of the parliament. After three rounds of discussions, Vladimir Putin, the president, will sign it into law. The budget shows how much trouble the Russian economy is in—and how unwilling the government is to face up to reality. 



It’s an austere affair: 700 billion roubles ($17.8 billion) of previous spending plans have been axed. New taxes on tobacco and alcohol will probably come in. These measures are partly to do with Russia’s poor economic growth, which has crimped tax revenues. The World Bank has cut its forecast for Russian economic growth to 0.3% in 2015 and 0.4% in 2016, down over 1% point on previous projections. The ruble has lost about 20% of its value against the dollar since October 2013. There are rumours that the central bank will soon enact controls on capital outflows, which in the first quarter were about $50 billion. 



But among the austerity there are some winners. Mr Putin wants to make good on an electoral promise to hike social spending (say, in the form of higher public-sector wages). Defence, with a 20% rise, is another. According to Julian Cooper, of Birmingham University, this largesse is little to do with the recent Ukraine crisis, but rather part of a long-term plan to modernise the military. Spending on defence will rise by 85% between 2012 and 2017."



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