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Potential Reforms in Russian Social Spending: Putin’s Pre-emptive Campaign Strategy

Andrei Belousov, economic advisor to Russian President Vladimir Putin’s, released a statement to Russian reporters that the Putin administration was considering budget reforms. Specifically, the government may cut funding from certain sectors or raise taxes to re-allocate funding towards social spending: infrastructure, education and health care. Belousov also emphasized that these are potential changes and that no final decision had been made. 

The Russian Federation’s decision to increase spending in these social services could be attributed to the low levels of reported economic growth and innovation. Only 10 percent of Russian businesses reported an emphasis on innovation, and World Bank data forecasts slowed GDP growth in the next two fiscal years, from 1.7% growth in 2018 to 1.8% in 2018. Meanwhile the World Bank projects the global economy to grow at a rate of 3.1% in 2018, a direct indication that Russia is lagging in economic growth. 

 (http://us-russia.org/758-state-to-spend-89bln-on-moscow-infrastructure.html)

(http://us-russia.org/758-state-to-spend-89bln-on-moscow-infrastructure.html)

This decision to publicly consider the possibility of greater social spending may be a product of shrewd political calculus than a component of genuine policy change. The 2018 Russian Presidential election will begin in mid-March, and despite the high probability of re-election, President Putin still has incentive to drum out as much support in the polls as possible for what could potentially be his final term as president. 

The political dialogue over increasing social spending coincides with a statement given by Putin in early January, in which he promised to raise the minimum wage in Russia, which currently stands at 9,489 rubles (166 USD) a month, by May 1st. Putin did not indicate the potential new minimum wage, including whether or not it would match current subsistence levels in Russia. In late December, the Russian Labor Minister Maxim Toplin cited that 13% of Russian citizens live below the poverty line. This demographic could be heavily swayed by promises of increased social spending and wage hikes, which presents a political opportunity for Putin to increase voter turn-out to strengthen his upcoming presidential campaign.