The government does not plan to increase spending in 2010, despite working on more optimistic revenue expectations based on oil trading at $57 dollars a barrel, up from an earlier forecast of $54, Finance Minister Alexei Kudrin announced Tuesday.
“A spending increase would require expanding the budget deficit and the use of reserves, which would be comparable to printing money. It could reignite problems with inflation and rising interest rates,” Kudrin told reporters.
The government’s adjusted socio-economic development forecast up to 2012, which has not yet been finalized, is based on an average price of $57 for Urals crude in 2009 and an increase of $1 a year for the next three years. The Economic Development Ministry had earlier put the forecast at $3 lower for each consecutive year.
Kudrin confirmed that federal revenue targets are being raised in line with the oil price forecast. In the coming days he is to meet with ministry officials to revise the 2010 federal budget based on the new data.
While the revision of the oil price forecast may provide a little help to the budget, it’s a drop in the bucket compared to precrisis revenues.
“Even with these oil price changes, the forecast revenue will be a lot less than previously expected and that means that we are a long way from returning to the optimistic plan set out by President Medvedev when he was elected,” said Chris Weafer, chief strategist with UralSib.
Aside from an increase in oil prices, the main thing that will aid the economy now is a fall in interest rates, Weafer said. “Right now, even if an entrepreneur or consumer can actually get a loan, it is simply too expensive for all but the truly desperate,” he said.
A source in the Economic Development Ministry told Interfax on Tuesday that gross domestic product is forecast to grow by 1.6 percent next year, according to a moderately cautious budget model, up from a prediction of 1 percent made in July.
“If prices rise, then in principle the economy might grow by 3 percent or even more in 2010,” the source said. The predicted trend sees the economy growing by 3 percent in 2011, by 4.3 percent in 2012 and possibly rebounding to precrisis levels as soon as 2012.
Despite the more upbeat forecasts, industrial output is still not expected to recover by 2012 from this year’s predicted dip of 12.4 percent. Industrial output is forecast to grow by 1.4 percent in 2010, compared with the previous estimate of 0.8 percent.
Exports are slated to grow as well, with the foreign trade surplus being revised up to $99 billion from $84 billion. According to the forecast, this year exports will rise by $12 billion to reach $286 billion.
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