The deficit of the Russian budget in the five months of 2023 amounted to 3.4 trillion rubles. Is it too much or little, will it be possible to keep the planned goal in 2% of GDP, and how the deficit will be fought& These issues are discussed by Alexey Vedev, director of Center for Structural Research at Institute of Economic Policy, named after E.T. Gaidar.
— Deficit of 3.4 trillion rubles for the period from January to May seems huge. Is that really the case?
— It’s actually not much, I’d even say just rather low. Here it is necessary to recall the Maastrich Agreement for the eurozone countries. According to it, the deficit limit should be no more than 3% of GDP. 3% of GDP in our case will be equal to approximately 4.5 trillion rubles. According to European concepts, this is quite a safe figure, we did not even approach this very Maastrichian norm.
— But it’s safe for the eurozone countries. And for us, for Russia?
— According to Russian concepts, it is also safe. In fact, in the last decades there was always the following problem: the exchange between economic growth and so-called stability. And I already said repeatedly that the Ministry of Finance with its surplus budget, “overestimate” stability to the detriment of economic growth. And, in my opinion, last year economic policy related to quantitative easing, was one of the key factors why the Russian economy showed very good results: we felt very little.
— If measured as a percentage, then the goal of the financial authorities for 2023 is the size of the budget deficit in the amount of 2% of GDP. And why exactly 2%? Why, for example, 1% is better, and why we should not leave the bar, for example, at 3% or even above?
— Ultimately these interest games affect the final demand. In all cases, if there is a budget deficit, then this means that the Ministry of Finance gives more money to the economy than takes away from it.
— That’s good!
— Yes, this is good, because it means a certain incentive of the economy. Of course, there are potential threats to such process, one of them is inflation. Although now, for example, we face a deficit of federal budget in the amount of 3.4 trillion rubles, but inflation at the same time is low enough. That is, below 3%, taking into account the fact that 4% is the goal for the whole year 2023.
— Well, if we leave above 3% according to the Maastrichian norm. Is that bad?
— I think that is quite good, because I think that it is necessary to put at the forefront economic growth and “some” stability. At the same time, I would still indicate among recommendations the targeting of the exchange rate. At least, in any case, do not cause his artificial downgrade, since without a doubt this is exactly what spins inflation.
Targeting in this situation in no case means a tight binding of the course to certain benchmarks, it means that the course must be kept in a specific corridor.
— Do you think it will be possible to stay in the declared two percent frame?
— I think it’s absolutely impossible to predict.
— Why?
— The fact is that the revenues of the federal budget as a whole can be predicted one way or another. But expenses are already more difficult to predict. Especially since they, in fact, are a purely “human” painting, as they say, a manual one.
Therefore, if the Ministry of Finance of Russia wants to comply the two percent framework of the federal budget deficit, then, of course, it will.
— Budget deficits are often considered as things to fight with. And what ways does Russia have today to combat the growth of this deficit?
— Firstly, I want to say that from two hundred countries of the world, I think that literally one or two or three live with a surplus budget, the rest are feel themselves calm with deficit. And you can fight this very, very simply: you have to cut budget spending, that’s all.
— But it may affect the economy not very well? As well as citizens of the country and the business?
— Yes, of course, it will affect them badly! These measures will mean underfunding of social programs, as well as of public investment and so on.