Russian finance ministry expects spending on defence and social security to plateau next year

BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/27

​In its budget policy framework proposal, the finance ministry noted it expects defence and social spending to grow by about 25 % this year. Social spending will rise as high as to more than 14.5 % of GDP and defence spending to 4.3 % of GDP. Defence spending, however, is expected to decline in 2016, while spending on domestic security and law enforcement will continue flat in nominal terms this year and next. Spending directed to various sectors of the economy is expected to remain unchanged starting next year. There is an effort to match growth in social spending to the inflation rate from next year onwards. Such a move, however, would require pension increases are wound down, in line with the ministry’s proposal, to slightly less than the projected inflation rate. The ministry further proposed increasing the general retirement age by six months a year until the pension age reaches 63 for both women and men (currently 55 for women and 60 for men).

Assuming the ministry’s forecast materialises, spending on education in coming years will still only match inflation and healthcare spending will rise just slightly faster than inflation.

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