Russia: Economic course unlikely to be changed as Putin set for another six-year term
Vladimir Putin appears set for a fourth presidential term following Russia’s 18 March election amid a lack of viable opposition and high approval ratings. The strongest opposition candidate, Alexei Navalny, is banned from running and has called for a boycott of the elections. As Putin is virtually guaranteed to remain at the helm, ensuring a continuation of the status quo, the vote should have little effect on Russia’s economy. Any shifts in Russian economy policy are more likely to be tied to the evolution of commodity prices and economic sanctions. The economy embarked on a modest recovery last year following a recession in 2015–2016 due to low oil prices.
In his annual state of the nation address on 1 March, which was postponed to coincide with the election, Putin outlined his key priorities for a fourth presidential term. The speech centered on boosting state spending on infrastructure and social measures, and the president made pledges to raise life expectancy, increase GDP and lower the poverty rate. Concrete details on how these measures would be funded are not yet known, although Putin stated that improving the efficiency of government spending could generate funds. Overall, Russia’s fiscal picture has become brighter thanks to higher oil prices, strong demand for the country’s bonds and a change in fiscal rules, which should give the government room to adjust the budget. Putin also unveiled a wide array of new weapons and struck a bellicose tone in the speech, suggesting that the relationship between Russia and the west will remain tense.
Looking ahead, the economy’s moderate recovery should continue this year, benefiting from monetary policy easing, higher oil prices and healthy household consumption. The production cut deal with OPEC will, however, keep oil output limited, capping the country’s export performance. Moreover, the recovery has been lackluster, as the economy is burdened with structural issues and is still to a large extent dependent on the energy sector.