Bad economical prospects for 2010

The regional budgets in 2009 were wrecked by the consequences of the economic crisis which caused a hard drop of tax revenues.

For example in Arkhangelsk oblast the amount of the profit tax fell down more than 5 times, in Karelia – three times, in Murmansk oblast – more than twice.

Totally in the North-West federal okrug of Russia the fall of regional industrial production index made in average 15% and in the processing industries - over 20%. During the year the budgets of the regions of North-West Russia lost over 37 billion rubles.

This situation made the regional authorities to cut the expenses and finally the regional budgets have been sequestered by average 20,3 percent or by 156 billion rubles. In order to save at least the minimum level of social obligations and investments the regions apply to the federal center for economic support and actively resort to the borrowing on the financial markets.

For the first nine months of 2009 the federal government increased the inter-budgetary transfers to the North-West regions by 29% and the level of borrowing of the regions grew up more than twice and made 48 billion rubles against 22,8 billion last year.

The financial situation in the regions in 2010 will also be deteriorated by the newly adopted scheme of collecting the tax on the development of natural resources.

If until now the regions could keep 5% of this tax in its budgets, from January 2010 it should totally be received in the federal treasury. For most regions of North-West Russia this new rules do not bring much losses but the budgets of Murmansk and Arkhangelsk oblasts, Republics of Komi and Karelia and Nenets Autonomous okrug will suffer sufficiently. Komi Republic for example will lose 5 billion rubles of incomes.

At that the federal government promised to partly compensate the losses for the regionals budgets but not more than 60% of pull-down incomes.

In such conditions the regions have to go for radical cutting of the budget expenses and adoption of deficit budgets. In Murmansk oblast the budget deficit in the next year will make 24% of the income part (5,6 billion rubles) and the social expenses to be cut by 750 million rubles. In Arkhangelsk oblast the deficit of the regional budget is planned on the level of over 15% (3 billion rubles). In Karelia the budget deficit will make 11% (1,5 billion). Even such “rich” resource development oriented regions like Komi Republic and Nenets okrug had to adopt deficit budgets.

Hopes of the regions for the federal transfers could be insubstantial because the federal budget itself is planned with the huge deficit. More likely, in 2010 the regions cannot figure on further growing of federal support.

As it follows from the speech of the President’s Plenipotentiary Mr. Ilia Klebanov the volume of federal transfers to the regions in the next year will go down and make only 85% from the current level.