Russia’s parliament passed a draft 2015-2017 budget on Friday that signaled everything was A-OK in the Eurasian federation.
Except, of course, for the fact that the Russian finance minister said the budget was based on an “alternative economic reality.”
As Business Insider noted, the Russian budget is based on three irrationally optimistic predictions: oil prices will average $100 per barrel, Western sanctions will be lifted in 2015 and economic growth in Russia will accelerate.
While Russia may be planning on high oil prices, the global price of oil has plummeted recently and Saudi Arabia, the world’s third-largest oil producer behind the U.S. and Russia, has signaled that it won’t cut oil production to try to artificially boost oil prices.
On Sunday, Goldman Sachs estimated that 2015 oil prices could fall to $80 per barrel or lower — well below Russia’s predicted $100 per barrel.
Over the past five months, oil prices have fallen roughly 25 percent, Reuters reported.
In the face of a deteriorating international situation and Western sanctions against the Kremlin, private investors have yanked $85 billion out of the Russian economy in 2014 so far, Bloomberg reported earlier this month.
And of course, economic growth might be hard to come by as the World Bank’s overview of Russia kicks off with, “The Russian economy is near stagnation,” and predicts “substantial risks” to Russian economic growth through 2016.
Will the Russian budget for 2015-2017 be amended to reflect more modest predictions?
Perhaps, (the finance minister is pushing for a 10 percent spending cut for 2016-2017, Business Insider noted) but the draft budget has built-in allowance of 500 billion rubles (roughly $12 billion) in spending from government reserves to prop up the economy next year, and Russian President Vladimir Putin has vowed not to cut social programs in tough times.
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