The Russian Economy at the Start of the Post-Putin Era
The fall of 2014 demonstrated that the economic sanctions on Russia accelerated inflation, which was triggered by the devaluation of the ruble. The ban Russian authorities imposed on Western food imports only exacerbated consumer price hikes. The elevated inflation rates (close to 10 per cent a year) may seriously distort the budget in the coming years. The law requires that the salaries of public-sector employees be adjusted for inflation if its annual rate exceeds 6 per cent. However, the 2015–17 budgets anticipate inflation rates of 5.5 per cent or lower and thus do not allocate funds for additional inflation-related expenses. Since the Russian authorities are unlikely to resort to salary freezes for public-sector employees, they will have to compensate for inflation adjustments by cutting other expenses or dipping into the Reserve Fund.
KeywordsBaseline Scenario Economic Sanction Reserve Fund Budget Revenue Russian Bank
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