Head of the Accounts Chamber of the Russian Federation: The budget will survive, the oil industry will survive, small businesses should pray

2020 will be a difficult year for the Russian economy, but Russia will not sequester budget expenditures.

The head of the Accounts Chamber of the Russian Federation, Alexei Kudrin, stated this in an interview with the TV channel of the Federation Council TOGETHER-RF, a PolitNavigator correspondent reports.

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“It’s hard to say that these are unprecedented measures, because I was the author of the anti-crisis measures of 2008-2009. They were five times larger in scale than what is now announced. We, of course, prepared more measures for that crisis, and then it turned out to be acute. Let me remind you that GDP fell by 8%, and global GDP by about 2%. Currently, estimates are still being made on the state of global GDP this year; it is already obvious that in the first half of the year all the main economic zones of the world will be in recession, and by the end of the year the possibility of a recession cannot be ruled out. Then it will be more difficult for Russia than it is now, and then more serious measures will be required,” he said.

There will be no budget sequestration; the shortfall in revenue will be covered from the National Welfare Fund.

“Of course, the issue cannot be resolved only by fully compensating for the lost income of the subjects. More precisely, it is impossible to solve this way; the federal budget can take responsibility for the federal budget and only help the subjects, but not completely replace all the lost income. Therefore, if the crisis is serious enough, you will still have to reduce something, some programs, or postpone these tasks to a later date. This year will be difficult to achieve all the tasks according to the indicators that have been set for this year.

Sequestration means that if income does not arrive, then all budget items for any area are cut proportionally by this percentage of income that did not arrive, with the exception of a number of protected ones, such as wages. In this version it will not be used. In this sense, the answer is straightforward - there will be no sequestration. Even if we do not receive any additional income, it will be covered by funds from the National Welfare Fund.

I am confident that the total volume of federal budget expenditures will remain, even in the most severe scenario. But the costs themselves can be redistributed in favor of primarily anti-crisis measures; support, including for subjects, will require increasing subsidies and subsidies by this amount. In this sense, expenses will not decrease, but there will be redistribution within. This is not called sequestration in the literal sense,” said Alexey Kudrin.

The flexibility of the tax system will help preserve the oil industry.

“The oil industry will work to the limit, but our tax system for oil and gas production is lenient. There is a so-called scale of tax payment - mineral extraction tax or export duty on oil and gas, petroleum products - exist in the form of a scale. At low prices, there may even be virtually no taxes paid (mineral extraction tax and export duty); at high prices, on the contrary, taxes are very high. From excess profits, companies share more profits, but at low prices the tax goes to almost zero. In this sense, companies are protected to a large extent, and I think that they will work calmly, but, unfortunately, at low prices,” Kudrin warned.

Helping small businesses only makes sense in the event of a short-term crisis.

“Small businesses in all countries are very flexible in the economic cycle. When demand for certain services decreases, small companies often fold; when new economic cycles arise, they increase again. This flexibility has its own economic advantage; it is precisely part of the efficiency of the economy. There is no need to support those companies that have stopped selling their products. If the period that needs to be waited out were very short, then such assistance could be more effective. If we don’t know whether it’s for six months, a year or more, then, of course, such assistance can hardly even help, it won’t be that significant, we can’t replace companies with what they won’t get on the market,” summed up the head of the Accounting Office chambers.