Putin Opts for a Large Deficit and Low Investment 2010 Budget

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Baev, Pavel K. (2009) Putin Opts for a Large Deficit and Low Investment 2010 Budget, Eurasia Daily Monitor, 3 August.

Prime Minister Vladimir Putin made his cabinet agree on a budget for 2010 that contains few anti-crisis ideas and hardly fits into the directives on stimulating innovations issued by President Dmitry Medvedev.

The new budget therefore demanded clearer priorities than just small flat cuts in every department and the structure of expenditures proves two propositions about Putin's policy: that he is afraid of the growing discontent within the country and that he has no ideas on revitalizing the economy.

Putin's economic policy, of which the new budget is just one manifestation, is increasingly disappointing for many economists, who argue that if a right measure is taken with a six to nine month delay, it becomes a wrong measure in the context of the deepening recession. The main source of these delays and half-measures is the dilemma that Putin is facing: either to dismantle his system of rigid state control over key economic activities or to focus on rescuing it and condemn Russia to protracted stagnation. He tries to postpone this choice by experimenting with "manual management" of local problems and harvesting PR dividends, but he can hardly fail to see that his orders cannot make credit flow from the banks clogged by bad loans or generate demand for antiquated cars produced by Avtovaz. Nothing in the budget suggests that Putin has recognized the imperative of scrapping his model of "command petro-economy," and that most likely means that long hours of reconciling intake and disbursement were wasted because someone else would have to take responsibility.

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Pavel K. Baev

Pavel K. Baev

Research Professor