The Russian government won't increase budget spending in the coming decade, Finance Minister Alexei Kudrin said Friday, after last year's slump in crude oil prices which prompted the country's first budget deficit in a decade.
"For the next ten years, real government spending won't grow, and might fall," Alexei Kudrin told businessmen and journalists at a conference in Moscow.
He said that Russia has budgeted for a deficit of 3% of gross domestic product this year, assuming an oil price of $70 a barrel, but the government wants to reduce the shortfall in future years.
Last year, Russia had a deficit of 5.9% of GDP, as oil prices fell after an eight-year rally, and the finance ministry is now expecting tax revenue to fall by a fifth.
"From 2012, we need to reduce the deficit to less than 1% [of GDP]," said Kudrin, explaining that this target is based on an "optimistic forecast" of oil prices of $60 a barrel that year.
The finance minister said Russia's economy has benefitted from a combination of unique circumstances during the last decade--the sustained increase in oil prices combined with growth in Russia's oil production--and that these circumstances won't be repeated this decade.
"We're clearly not going to have an average oil price of $70 for the next ten years." He predicted that the oil and gas sector's share in Russia's GDP will shrink by more than a quarter.
Speaking at a university with many students in the audience, the finance minister reiterated the government's desire to diversify the economy and foster innovation.
However, he said there was a lack of opportunities for venture capital funds and expressed regret that the government accounts for such a large chunk of the investments.