The pandemic has exacerbated Russia's regional debt crises, forcing the national government to provide significant additional funding. Even in a normal year, Russia's regional governments struggle to balance the books, as their only revenue comes from personal income and corporate taxes. The national government is able to generate revenue from state-adjacent oil and gas companies, but regions must make up budget shortfalls by borrowing and receiving federal transfers. Though regional economies improved during the summer, the impending second wave of the coronavirus threatens to hit even harder than the first did, which will create a significant economic impact especially for less well-connected regions and those dependent on oil and gas prices. This raises questions for the recovery of the Russian economy, which the government has so far been positive about.
This article discusses why Russia's new draft budget, meant to cover the next three years, does not include spending cuts. Russia, like most other countries, spent heavily during the coronavirus pandemic, creating a significant budget deficit. Yet the new budget, devoid of expected cuts that would've closed the deficit, presents an optimistic outlook on the Russian economy's recovery.
