Monday, May 9, 2016

Andre Tartar and Ott Ummelas — Putin Walks Fiscal Tightrope as Era of Deficits Seen to 2020

Budget won't be balanced until 2020 or later, survey shows.
The horror of it. Sell, sell, sell!
The challenge for President Vladimir Putin is to manage an era of thrift with the economy in pieces and elections looming this year and in 2018. A period of entrenched deficits that’s without precedent during Putin’s 16 years in power means the government would have to tread carefully to avoid busting the budget after oil’s collapse.

“While large scale fiscal and monetary stimulus is usually highly effective in reviving short-term economic activity, they won’t improve the long-term prospects of the Russian economy,” said Sergey Narkevich, an analyst at Promsvyazbank PJSC in Moscow. “On the contrary, with high probability their use will destabilize budget and financial systems down the road.”
"In the long run" again.

The Russians need to listen more to the Chinese than Western "experts." They should have learned this lesson when US advice nearly sunk them. Not to mention oil importer Japan running a humongous deficit for decades now.

Fiscal austerity and liberal "reform" are the last things Russia should be looking to right now.

Now that they have floated the ruble, they need to use policy space by loosening their fiscal and monetary stance and aiming to bring all available resources on line to best advantage for public purpose.

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