Abstract
The paper discusses fiscal policy parameters through 2024. The suggested way to ensure long-term fiscal stability is stabilizing both the general government revenues and expenditures as percentages of GDP at levels differing by the public debt service payments and then applying a new version of the fiscal rule. The redistribution of fiscal spending from unproductive to productive areas (primarily investment in human and physical capital) is considered to boost economic growth. The possible use of additional spending on education, public health, and transport systems is presented, as is the optimization of expenditures in nonproductive areas.
Highlights
The Russian economy has faced serious problems in the past few years
Sokolov / Russian Journal of Economics 3 (2017) 221−239 started as early as 2013, when GDP growth was at a low rate of 1.3%, and continued to slow down during the first half of 2014
In 2017, Russia entered a long period of deteriorating demographic performance; the workforce will decline by 0.5%–0.7% per year over the 10 years, threatening an additional deceleration of economic growth to 0.5 percentage points (“p.p.”) during the period (Ivanova et al, 2017)
Summary
The Russian economy has faced serious problems in the past few years. The physical GDP was lower during Q1 2017 than at the beginning of 2012. This dependence can be attributed to various factors: a) the government is increasing its involvement in certain socially important functions (e.g., education and health care); b) as the economy develops, its need for regulation increases (e.g., in relation to natural monopolies); c) growing per capita revenues are accompanied by an aging population, requiring additional social policy expenditures; and d) labor productivity grows considerably slower in the public sector than in the market sector, so that, for a given proportion of goods and services production, the share of employment in the public sector increases gradually Another mechanism of correlation between the level of economic activity and public expenditures was proposed by J. The effect of a budget maneuver is intensified considerably if accompanied by several structural reforms
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