MinFin’s work on long-term fiscal planning, which extends all the way to 2030, understandably depends on underlying assumptions about cumulative growth attainable over the forecast period. The changes, which might appear small if viewed for a standalone year, accumulate to a significant difference in terminal year GDP levels if applied across 15-20 years: the difference between 3% and 2.5% growth over 15 years accumulates to a difference of 7%. This is of consequence for the amount of expenditures which are permissible in the long run under the fiscal rule.
We note that the government’s forecasts are converging with our views (although they remain a tad above us). It will be important to watch how this affects the ongoing deliberations about Russia’s fiscal strategy.