January 26, 2020

Putin Decides Low-Growth Russia Could Use Some Help From Keynes
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.With time running out on his final term as president, Vladimir Putin evidently wants to end it with a boom.Putin has been a cautious steward of Russia’s $1.7 trillion economy, partly to shield it against blowback from his more adventurous foreign policy. For the last five years, he’s imposed some of the world’s toughest budget austerity. Combined with high interest rates, that’s made Russia a favorite of carry-trade investors –- but it’s left living standards mired at 2012 levels and economic growth stuck below 2%.Now, the president is changing course –- and channeling an economist whose pro-growth ideas are mainstream almost everywhere else: John Maynard Keynes. Putin just appointed a new cabinet stacked with advocates for more government spending and investment, a Keynesian recipe. And he’s told them to hurry up about it.In power for 20 years, Putin gets credit at home for steadying an economy that suffered a decade of chaos and debt default after the Soviet Union collapsed. But lately, stability has threatened to turn into stagnation.Until now, the government hasn’t rushed to the rescue. It’s pared borrowing to a minimum in the last five years, and has been stashing any spare cash from Russia’s commodity exports into a massive rainy-day fund.“Russia’s first priority was to secure its borders to reduce its vulnerabilities,” said Elina Ribakova, deputy chief economist at the Institute of International Finance in Washington. “At the time, it would’ve been wrong to lean on Keynesian theories. Now they’re so comfortable on that front that it’s time to start thinking about how to boost potential growth.”‘Feel the Change’Western sanctions and volatile oil prices have been a key reason for Putin’s “fortress Russia” approach, which aimed to make the economy self-sufficient. But the turn to Keynesian stimulus shows that Russia isn’t walled off from wider currents of economic thinking. There’s been a similar shift in other countries.The U.S. has widened budget deficits even after a decade-long expansion, and the U.K. and Germany have begun to shift away from austerity. India and Turkey are trying to boost growth via fiscal policy.At the first meeting of Russia’s new government, Prime Minister Mikhail Mishustin said he wants to get the spending spree underway quickly. Russians should “feel the changes in their lives and surroundings in the near future,” he said.Mishustin has appointed former Kremlin adviser Andrey Belousov, who’s lobbied for more government borrowing and spending, as his deputy premier. Evgeny Yasin, a director at Russia’s Higher School of Economics and one of the country’s most prominent economists, calls Belousov a “Russian Keynesian.”“Russian political changes at this moment have one goal: to boost economic growth,” Billionaire Oleg Deripaska, founder of aluminum producer United Co Rusal Plc, told Bloomberg Television in Davos.There are limits to how far he can loosen the purse-strings. The government is sticking to a budget law that says revenue from oil above $42 a barrel (it currently trades around $61) must be saved, not spent.Still, extra spending this year could total 2.1 trillion rubles ($34 billion), or 1.3% of gross domestic product, according to calculations by ING Groep NV in Moscow. The government will likely tap its rainy-day fund and release about 500 billion rubles left over from last year’s budget, which posted a surplus equal to 1.8% of GDP.Any Means NecessaryA key part of the fiscal push will be speeding up an existing plan to invest $400 billion in things like highways, housing and ports over four years. The so-called National Projects got mired in bureaucracy and made little progress in 2019.Other elements are new. Putin proposed last week to spend about $65 billion through 2024 on expanding benefits for families and the poor.Putin’s growth program relies mainly on state spending because increased pressure on business and a still-uncertain sanctions outlook has stalled private-sector investment.Central Bank Governor Elvira Nabiullina argues that Russia needs structural reform aimed at improving the business climate and increasing competition. Putin has long claimed to support such measures, but never made much progress on implementing them.“This isn’t a market economy,” and Putin doesn’t follow any particular economic principles, Yasin said. The president “uses any methods that seem necessary to him in order to maintain full control.”His latest methods may not deliver much of a boost right away. Budget easing will probably add 20 or 30 basis points to economic growth rates in the short term, according to Bloomberg Economics.But as Keynes always argued, spending is better for growth than squirreling away money. Markets have generally welcomed the shift –- including even some of the bond investors who’ve reaped rewards from years of tight policy.Russian austerity was geared all along to “preparing for a future crisis,” said Oleg Shibanov, a finance professor at Moscow’s New Economic School.“Russia is prepared now,” he said. “I expect that there’ll be more spending and more investment.”\--With assistance from Anya Andrianova.To contact the reporters on this story: Natasha Doff in Moscow at ndoff@bloomberg.net;Evgenia Pismennaya in Moscow at epismennaya@bloomberg.netTo contact the editors responsible for this story: Gregory L. White at gwhite64@bloomberg.net, Ben HollandFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Related Stories
Latest News
Top news around the world
Coronavirus Disease

Coronavirus disease (COVID-19) is an infectious disease caused by a newly discovered coronavirus.

Most people infected with the COVID-19 virus will experience mild to moderate respiratory illness and recover without requiring special treatment. Older people, and those with underlying medical problems like cardiovascular disease, diabetes, chronic respiratory disease, and cancer are more likely to develop serious illness.

Around the World

Celebrity News

> Latest News in Media

Watch It
Julia Fox defends viral ‘Uncut Gems’ interview moment: ‘I was stoned’ | Page Six Celebrity News
February 17, 2022
4m-p0_-ePd8
Alexia Echevarria pushed ‘RHOM’ producers to show more of son Frankie’s recovery | Page Six
February 17, 2022
E-wTaN9NfkI
Pete Davidson rejoins Instagram amid Kanye West drama | Page Six Celebrity News
February 17, 2022
SsC3dmsI6t4
Aaron Rodgers And Shailene Woodley Reportedly Break Up | TMZ LIVE
February 17, 2022
FoErdRE8Qe4
Chet Hanks Done Talking About Famous Parents, Becoming Personal Trainer | TMZ
February 16, 2022
5_UrULOkQ6o
Woman Stabbed at Foot Locker During Nike Shoe Release
February 16, 2022
TfuXMs1JdVg
Steph's Freaky Side, "Summer House" & "Love During Lockup"
February 17, 2022
9W_raO0zlA8
Tay or Nay, Offset's Sushi Anxiety & Nick on Monogamy
February 17, 2022
PauYHpJRA6o
Kim Kardashian & North West TWINNING in Matching Pajamas | E! News
February 17, 2022
b-_Oib6R108
Adam McKay - Hollywood Walk of Fame Ceremony
February 17, 2022
tYtzsHoOZzo
Tom Holland, Mark Wahlberg, and the Cast of 'Uncharted' Talk Most Challenging Stunts
February 15, 2022
d3ksX-SKi8c
Ryan Reynolds and Walker Scobell on ‘The Adam Project’, ‘Deadpool’, and Possible ‘Star Wars’ Role
February 16, 2022
5TxJsbJr9Dk
TV Schedule
Late Night Show
Watch the latest shows of U.S. top comedians

Sports

Latest sport results, news, videos, interviews and comments
Latest Events
04
May
CONCACAF CHAMPIONS LEAGUE: Playoffs
Seattle Sounders - Pumas
04
May
USA: Major League Soccer
FC Cincinnati - Toronto FC
03
May
ENGLAND: Championship
Bournemouth - Nottingham Forest
02
May
ENGLAND: Premier League
Manchester United - Brentford
02
May
ENGLAND: Championship
Fulham - Luton
02
May
SPAIN: La Liga
Getafe - Real Betis
02
May
GERMANY: Bundesliga
Bayer Leverkusen - Eintracht Frankfurt
02
May
GERMANY: Bundesliga
Borussia Monchengladbach - RB Leipzig
02
May
ITALY: Serie A
Atalanta - Salernitana
01
May
ENGLAND: Premier League
Tottenham Hotspur - Leicester City
01
May
SPAIN: La Liga
Barcelona - Mallorca
01
May
ITALY: Serie A
Roma - Bologna
01
May
ENGLAND: Premier League
West Ham United - Arsenal
01
May
ENGLAND: Premier League
Everton - Chelsea
01
May
ITALY: Serie A
Udinese - Inter Milan
01
May
ITALY: Serie A
AC Milan - Fiorentina
01
May
ITALY: Serie A
Juventus - Venezia
01
May
SPAIN: La Liga
Rayo Vallecano - Real Sociedad
30
Apr
GERMANY: Bundesliga
Mainz - Bayern Munich
30
Apr
GERMANY: Bundesliga
Borussia Dortmund - Bochum
30
Apr
ENGLAND: Premier League
Newcastle United - Liverpool
30
Apr
SPAIN: La Liga
Athletic Bilbao - Atletico Madrid
30
Apr
ENGLAND: Premier League
Leeds - Manchester City
30
Apr
SPAIN: La Liga
Real Madrid - Espanyol
30
Apr
ITALY: Serie A
Napoli - Sassuolo
28
Apr
ENGLAND: Premier League
Manchester United - Chelsea
27
Apr
CHAMPIONS LEAGUE: Semifinal
Liverpool - Villarreal
27
Apr
ITALY: Serie A
Bologna - Inter Milan
26
Apr
CHAMPIONS LEAGUE: Semifinal
Manchester City - Real Madrid
25
Apr
ITALY: Serie A
Sassuolo - Juventus
24
Apr
SPAIN: La Liga
Barcelona - Rayo Vallecano
24
Apr
ITALY: Serie A
Lazio - AC Milan
24
Apr
ENGLAND: Premier League
Liverpool - Everton
24
Apr
ENGLAND: Premier League
Chelsea - West Ham United
24
Apr
ITALY: Serie A
Empoli - Napoli
23
Apr
ENGLAND: Premier League
Brentford - Tottenham Hotspur
Find us on Instagram
at @feedimo to stay up to date with the latest.
Featured Video You Might Like
zWJ3MxW_HWA L1eLanNeZKg i1XRgbyUtOo -g9Qziqbif8 0vmRhiLHE2U JFCZUoa6MYE UfN5PCF5EUo 2PV55f3-UAg W3y9zuI_F64 -7qCxIccihU pQ9gcOoH9R8 g5MRDEXRk4k
Copyright © 2020 Feedimo. All Rights Reserved.