Probability theory: The Ministry of Finance has presented a new budget forecast
The dollar may rise in price to 133 rubles by 2042. Such a scenario is allowed in the new budget forecast prepared by the Ministry of Finance of the Russian Federation. In total, the document contains two scenarios — basic and conservative. The opinions of the experts interviewed by Izvestia regarding the chances of these scenarios being implemented were divided. In both cases, it is assumed that the budget will be in deficit in 17 years. What else the Ministry of Finance expects in the future, read in the editorial.
The expected scenario
The Ministry of Finance has prepared a new budget forecast. It is designed for a long period — until 2042. The document has already been signed by Prime Minister Mikhail Mishustin.
The forecast provides for two scenarios of socio-economic development in Russia in the long term, compiled by the Ministry of Economic Development, basic and conservative.
The basic option is based on the priority of fulfilling the tasks outlined by the president, according to which it is planned to ensure through active investment growth and technological sovereignty, the Ministry of Economic Development emphasized in a conversation with Izvestia.
The dynamics of the main federal budget indicators in this scenario suggests that Urals crude oil will cost $69 per barrel by 2042. Meanwhile, the US dollar exchange rate will rise to 133.1 rubles.
— The dynamics of the ruble exchange rate and energy prices will be determined by the state of the trade balance and the growing demand from developing countries, primarily China and India. In the long term, prices in commodity markets are expected to stabilize, and the dynamics of the ruble exchange rate will compensate for the difference in inflation rates, the Ministry of Economic Development explained.
Federal budget revenues will amount to 14.1% of GDP (104.2 trillion rubles). Oil and gas revenues will be 1.9% (14 trillion rubles). Non-oil and gas revenues, in turn, will come in the amount of 12.2% (90.2 trillion rubles). Expenditures will amount to 17% of GDP (125.8 trillion rubles). The national debt will amount to 238.5 trillion rubles in 2042, which is equal to 32.2% of GDP.
It follows from the basic forecast that the main drivers of budget revenue growth after 2026 will be the non-oil and gas sectors of the economy. Revenues from them will average 2.9% per year. The key sources of growth will be the value added tax and corporate income tax.
At the same time, oil is expected to become cheaper. Starting in 2026, it is planned to gradually reduce the base price of fuel by $1 per year, to $55 per barrel by 2030. The subsequent annual indexation will be 2% until 2031.
"This will limit the impact of the external environment on the federal budget, strengthen its stability and ensure the necessary level of resources to fulfill the tasks set," the press service of the Ministry of Finance of the Russian Federation said.
The conservative forecast, in turn, provides that budget revenues will be at the level of 89.9 trillion rubles (13.8% of GDP). Oil and gas revenues will come in the amount of 8.6 trillion rubles, which is equal to 1.3% of GDP. Non-oil and gas revenues will amount to 81.2 trillion rubles (12.5%). Expenses, in turn, will amount to 144.6 trillion rubles (22.2%). The national debt will reach 452.9 trillion rubles (69.4%).
The editorial board of Izvestia sent a request to the Ministry of Finance of the Russian Federation. No response has been received at the time of publication.
Abandoning the oil needle
The budget forecast published by the Ministry of Finance is a balanced long—term work plan, said Kaplan Panes, Deputy Chairman of the State Duma Committee on Budget and Taxes.
"Its main goal is not to scare with numbers, but to identify possible development paths in advance and create a reliable basis for decision—making regardless of external conditions," the deputy explains.
Both options considered in the forecast are just a model for planning, he clarifies.
— The focus of this document is to ensure the country's planned development and the well—being of its citizens, even in a difficult global environment. Those figures that may raise questions, such as the dollar exchange rate or the budget deficit, are based on a conservative principle so that we always have a margin of safety. This is a responsible approach, in which we prepare for different scenarios, but we aim to implement a more favorable one," the parliamentarian says.
He considers the basic forecast to be more realistic. This scenario not only sets moderate and achievable economic parameters, but also leads to more manageable levels of deficits and government debt. This version claims a more than twofold increase in income and a threefold increase in expenses, says Inna Litvinenko, associate professor of Economics and Management at the Russian State University of Social Technologies. In her opinion, the basic scenario seems realistic because all the figures in it are based on the resources that are used for technological development and transformation of Russia.
Consistent work in several areas is needed to bring this forecast to life, Panes emphasizes.
— Firstly, it is important to ensure the planned growth of non-oil and gas revenues, which directly depends on the success in the development of domestic production and technology. Secondly, strict compliance with budget rules that control expenses is required," the parliamentarian explains. At the same time, the external economic situation should remain within the established forecast framework, without sharp shocks.
The basic scenario can be realized with a full-scale diversification of the Russian economy, adds Litvinenko.
— We are moving away from energy resources as the main base for replenishing the budget and strengthening technological sovereignty. Avoiding energy sources is the main task, because the stated oil prices are much higher than what is actually visible on the market," she points out, stating that the cost of fuel will continue to decrease.
Candidate of Economics, Associate Professor of the Department of Strategic and Innovative Development of the Financial University Mikhail Khachaturian does not exclude the possibility of implementing the basic scenario. However, he believes that the probability of this is in the range of 15-20%.
On the contrary, a conservative forecast seems more realistic to him. According to the expert, when forming this option, the minimum possibility of easing the current level of foreign economic and political tension was taken into account.
— In general, it is reasonable to assume that in the context of the implementation of a conservative budget forecast, when developing tools for the development of the national economy, the government and the Ministry of Finance plan to focus on the development of the domestic market while maintaining foreign economic activity with a focus on friendly and neutral countries. It is also important to develop the most effective tools to reduce the negative impact of foreign economic restrictions," says the expert.
I agree that a conservative scenario is more likely to come to life over a long horizon, and investment adviser to the registry of the Bank of Russia Yulia Kuznetsova.
— It is based on cautious assumptions about the pace of economic growth, takes into account external constraints, high volatility of commodity markets and the growth of government budget obligations. Historically, it is precisely such scenarios that most often turn out to be closer to the actual trajectory of the economy," the Izvestia interlocutor is sure.
This option is being implemented while maintaining increased geopolitical risks, limited access to external capital markets, pressure on export revenues and the need to support the economy through budget spending, she lists.
Estimated reference point
Yulia Kuznetsova is convinced that the forecast of the dollar exchange rate at the level of 133 rubles by 2042 does not look like an extreme scenario, but as a reflection of long-term macroeconomic processes.
"We are not talking about a sharp devaluation, but about a gradual weakening of the ruble over the horizon of almost two decades, taking into account the inflationary differential, differences in monetary policy and the structure of the economy," she clarifies.
In the context of the expected exchange rate, it should be noted that the forecast takes into account the weighted average exchange rate against a basket of currencies, rather than specific indicators, Mikhail Khachaturian draws attention.
— Based on this, we can say that the projected degree of devaluation of the national currency does not exceed 40%, which is a very decent indicator for the future of 17 years, — the expert believes.
The projected weakening of the ruble should be considered as a calculated guideline, rather than an accurate forecast, emphasizes Kaplan Panes.
— This is a long-term assessment based on the principle of caution. It takes into account several factors: the gradual decline in the share of oil and gas revenues in the economy, the difference between internal and external inflation, as well as structural changes in trade, the parliamentarian lists. Such a smooth change of course, in his opinion, is part of a common model that helps to adapt to changing conditions.
In addition, the weakening of the national currency is associated with an increase in budget expenditures, the need to stimulate the economy and maintain export competitiveness, adds Kuznetsova.
— In long—term models, the currency of emerging markets tends to weaken against the dollar — this is a global practice, not a unique feature of Russia, - explains the interlocutor of Izvestia.
Meanwhile, Khachaturian expects that the real dynamics of the exchange rate will not be so negative.
"Taking into account the preservation of the current foreign economic and foreign policy conditions of the functioning of the Russian economy, the probability of implementing a scenario with a dollar of 133 rubles is 25-35%," the economist predicts.
Inna Litvinenko also admits the possibility of achieving such a rate of the American currency by 2042. However, it reminds us that this year all experts agreed that at the end of November and December the dollar would cost 90-94 rubles, but it fell to 75 rubles, which indicates difficulties in predicting the exchange rate in the long term.
Safe scarcity
Both scenarios contained in the forecast assume that the federal budget will be in deficit. Reaching a deficit-free budget is possible only if several conditions are combined: sustainable economic growth above 2-3% per year, expansion of the non-resource tax base, increased labor productivity and stricter control over the structure of expenditures, lists Yulia Kuznetsova.
"Without deep structural reforms, budget deficits over a long horizon are likely to remain the norm, not the exception," she warns.
However, its presence is not a negative factor, Mikhail Khachaturian is sure. The excess of expenses over income indicates the orientation of the state to increase the level of investment activity.
"If the maximum effectiveness of existing and promising investment projects and programs is ensured, reaching a deficit—free budget, which means maximum growth in private sector investment and business activity and a decrease in the share, but not a decrease in the volume and significance of similar activity on the part of the state, is quite possible beyond the borders of 2042," the expert expects.
At the same time, the question arises whether Russia needs a deficit-free budget in principle, Inna Litvinenko emphasizes.
"In conditions of closing borders, intensifying sanctions policy and strengthening the protectionist model of global economic development, it is more profitable to live in a budget deficit rather than in surplus," the Izvestia interlocutor is convinced.
However, it is important to take into account that in the full sense the issue of a deficit-free budget is not raised in the forecast of the Ministry of Finance, says Kaplan Panes. Instead, the document focuses on ensuring a "primary surplus," which means exceeding revenues over expenditures without taking into account payments on the national debt.
This will be achieved primarily by outstripping the growth of revenues from the non-resource sector, such as value added tax and income tax, while restraining the growth rate of expenses within the established rules, the deputy believes.
"This approach allows us to control the financial situation and gradually reduce the budget's dependence on commodity markets, which in the long run creates healthier foundations for the economy," he concludes.
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