{"id":32364,"date":"2016-01-15T23:19:48","date_gmt":"2016-01-15T22:19:48","guid":{"rendered":"http:\/\/www.w-t-w.org\/en\/?p=32364"},"modified":"2016-01-15T23:20:09","modified_gmt":"2016-01-15T22:20:09","slug":"32364","status":"publish","type":"post","link":"https:\/\/www.w-t-w.org\/en\/32364\/","title":{"rendered":"What Do Russian Budget Cuts Mean for Putin?"},"content":{"rendered":"

Andrey Ostroukh<\/span> and Andrey Ostroukh write:\u00a0 Russia\u2019s government is considering swingeing budget cuts and the sale of stakes in state companies as it grapples with a plunge in the price for crude oil, its main export, that the prime minister said could cause \u201cprolonged stagnation.\u201d<\/p>\n

Russian Economy Minister Alexei Ulyukayev said Wednesday that Russia would have to adjust to a \u201cnew normal\u201d of low prices for crude, which will last for a \u201cvery lengthy\u201d period. Finance Minister Anton Siluanov said the government would propose a 10% cut to spending from a budget that was based on an oil price of $50 a barrel, nearly $20 higher than the current level.<\/p>\n

\u201cWe need to prepare for the worst scenario,\u201d Prime Minister Dmitry Medvedev<\/span><\/u> said in a speech at an economic conference in Moscow Wednesday. \u201cWe need to live according to our means, including by reducing budget expenditures, decreasing spending on the state apparatus, the privatization of part of state assets.\u201d<\/p>\n

The suggestion of potential state-asset sales\u2014often touted in recent years, but hardly ever executed\u2014shows how wide Russian officials are casting the net for ways to shore up a federal budget that receives half its revenue from the oil and gas sector. High oil prices had been the cornerstone of President Vladimir Putin<\/span><\/u>\u2019s 15-year rule, allowing him to boost social spending and raise living standards. But the fall in the oil price and sanctions over the Kremlin\u2019s interventions in Ukraine brought about a 3.7% economic contraction last year, accompanied by a slide in real incomes. Officials say the economy will grow this year, but the World Bank forecasts a 0.7% contraction.<\/p>\n

\u201cMany became poorer; the middle class suffered. That\u2019s the most painful consequence of last year\u2019s economic blows,\u201d said Mr. Medvedev.<\/p>\n

Still, there appear few threats to Mr. Putin\u2019s rule. His approval rating has risen above 80% in the last two years, pollsters say, since Russia seized Crimea and has presented itself as being under siege from the West.<\/p>\n

Mr. Putin has said repeatedly that Russia\u2019s economic slide has bottomed out, but late last year he indicated that budget cuts could be necessary. Mr. Siluanov said spending reductions could be as high as 10%, or 500 billion rubles ($6.5 billion), to meet Mr. Putin\u2019s demand that the budget deficit be kept under 3% of gross domestic product. Mr. Siluanov, whose ministry has long pushed for tighter spending, said the government shouldn\u2019t rapidly increase borrowing.<\/p>\n

Mr. Ulyukayev, the economy minister, said Wednesday that the government could sell stakes in the two largest state banks, Sberbank and VTB, in part to inject funds into them. The Russian banking system needs new funds, he said, as Western financial markets have remained closed to them due to sanctions.<\/p>\n

Russian officials have in recent years repeatedly floated the idea of selling stakes in state giants such as oil producer OAO Rosneft, but the plans were never realized as officials said they shouldn\u2019t be sold on the cheap.<\/p>\n

Mr. Medevedev described Russia\u2019s economic situation as \u201cdifficult, but manageable.\u201d He warned that a return to growth wasn\u2019t assured and that the government needed to act to stimulate investment and head off an \u201ceconomic depression (that) could last for decades.\u201d<\/p>\n

The slide of the oil price to $30 has hammered the Russian ruble, sending it to its lowest-ever closing level of 77 to the dollar Tuesday. The weakening currency spurred an increase in consumer prices of 12.9% last year, and analysts say further weakness limits the room for the central bank to cut interest rates to help drag the economy out of recession. The ruble recovered almost 1% Wednesday as the crude price edged upward.<\/p>\n

Former Finance Minister Alexei Kudrin, a confidant of Mr. Putin, said Wednesday that Russia should raise the retirement age, something that the Kremlin has previously ruled out, and that the economy needed to grow by around 5% a year before social spending could be increased. Mr. Kudrin, a favorite of Western investors for his commitment to fiscal discipline and market reforms, was in talks late last year with senior officials on a possible return to a top government post, but such a move isn’t imminent, according to a person familiar with the matter. A spokesman for Mr. Kudrin confirmed he had met with Mr. Medvedev at the end of last year to discuss economic issues, and said the former minister hadn\u2019t been offered a government post.<\/p>\n

\"Russian<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Andrey Ostroukh and Andrey Ostroukh write:\u00a0 Russia\u2019s government is considering swingeing budget cuts and the sale of stakes in state companies as it grapples with a plunge in the price for crude oil, its main export, that the prime minister … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[13],"tags":[],"class_list":["post-32364","post","type-post","status-publish","format-standard","hentry","category-finance"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t