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Friday, 14.10.2011
Impending Crisis: Russian Court for budget cuts
Moscow. The Russian Court advised the Russian Government to develop a replacement budget due to the treat of a second crisis. However, experts warn that this step might cause great confusion.
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According to the deputy Chairman of the Court, Valeri Goregljad, the risk of a new economic crisis in Russia is very high. That the budget for 2012-2014 will be met is in danger.
On its website, the Court advises the Russian Government to introduce a "drastic budget cut". A parallel budget should be drawn up, purely for internal purposes without Parliament involvement.
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Drastic cuts
The adopted budget for the forthcoming years is based on overly optimistic forecasts, said Goregljad. Inflation will be higher than predicted in the coming years: Annually 0.5 to 1 percent more than predicted - that's more realistic. For 2012 the court forecasts an inflation of 6.5 percent - but the prognosis was a rate of 6 percent for 2012, 5.5 percent for 2013 and 5 percent for 2014.
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Goregljad sees the lower oil prices as a reason for the decline of the manufacturing industry during the years 2008-2010. The construction industry has not recovered to this day. Should the price of a barrel of oil be reduced by only $1, the Russian budget would have a hole of 55-58 billion Rubel (€1.28 to 1.35 billion). Only the state reserves were able to cushion the crisis.
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A parallel budget is a dangerous step
Analyst Igor Nikolajev believes that an alternative budget would be a dangerous step that could lead the whole fiscal policy into a parallel reality and cause great confusion. If anything, two alternate plans would have to be created - one for a super positive and one for a negative scenario. But: We are having difficulties with one budget, how should we cope with three?
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Population is pessimistic
Meanwhile, surveys of the Russian population show that the fear of a further crisis is spreading: superjob.ru has found 45 percent of Russians believe a crisis is inevitable.
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According to ROMIR, the number of people who believe that a second wave of the global economic crisis is highly likely has increased by one and a half time and represents 53 percent of all respondents.
Original German text can be found here >>>
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