Russia will seek to
balance its budget by 2015, based on oil at $70 per barrel, Finance
Minister Alexei Kudrin said Tuesday, signaling that new strategies
will be needed as the country struggles to erase its first deficit in
years.
As commodity prices plunged in the wake of the
financial crisis, Russia's economy ground to a near halt, forcing the
country to spend billions propping up state companies in order to
stave off unemployment and public unrest.
But while Prime
Minister Vladimir Putin has called for the deficit to be cut from up
to 5.4% of gross domestic product--around $77 billion--this year to
zero in 2015, economists question whether this is possible,
especially with the government looking to spend big to help growth
and ease social tensions ahead of 2012 presidential elections.
"Our
goal is to gradually get to a level where the budget is balanced at
$70 per barrel. This means we need to cut costs, cut the deficit,"
Kudrin said. "By 2015, we can easily do this without changing
our social obligations."
Last year's budget would have
been balanced at the price of $98 per barrel for oil--Russia's chief
export and the main driver of its economy. To get that number down to
$70 per barrel would entail huge cuts in spending, analysts said.
"Kudrin's plan is achievable, but there would have to be
more efficient spending, and not simply less spending," said
Yevgeny Gavrilenkov, chief economist at Troika Dialog. "And of
course, there would have to be cuts."
This year's budget
has already been amended twice to allow for increased spending in
2011. Further increases may come in the form of more spending on
everything from pensions--which were already increased by 45% this
year and may be hiked further in 2011--to the 2014 Winter Olympics,
taking place in the city of Sochi with an estimated price tag of $14
billion.
One place the government should look to cut costs
would be in its support of lumbering state-run giants like Avtovaz,
which received a $1.3 billion state bailout package last year and
will likely need support well into the next decade, Gavrilenkov said.
"Most of that money goes into a black hole."
Putin
however, has dismissed that idea, saying last week that he saw the
de-industrialization of the country as a dead end and pledged support
for the aviation and automotive sectors, which are slated to receive
a combined $12 billion in state support between 2009 and 2011.