After two years of recession, the worst may be over for Russia's economy, but not for its leaders. As the year approaches its final quarter, the Russian government is still trying to finalize its 2016 federal budget. Though the budget has long been a point of contention in the Kremlin, this year's budget battle has been especially divisive amid dwindling funds and disappearing options for spending cuts. To make matters worse, just weeks before September's parliamentary elections — a bellwether for the ruling United Russia party ahead of the 2018 presidential vote — Russians are protesting their economic straits in droves. Facing an unhappy public and a $31 billion shortfall in the current budget drafts, Prime Minister Dmitri Medvedev has been given a tall order: plug the gaping hole in the budget while also allowing for billions more in social spending.
Despite the Kremlin's trouble, the Russian economy has started to show small signs of recovery this year, contracting at a slower rate since January. In June, the Central Bank of Russia described the economy as stable, and inflation has dropped from 13.4 percent in 2015 (a 15-year high) to 7 percent today. The ruble is also regaining its strength, rising 14 percent against the dollar this year. At the same time, the currency remains low enough to create a competitive exchange rate, a boon for agricultural, pharmaceutical and petrochemical industries. After two years of shrinking, industrial production may actually resume growth by the end of the year. Russian credit organizations, meanwhile, posted their first net profit ($460 billion) in two years, and during the week of Aug. 15, Russian stocks traded at their highest point in history. Russia's citizens, however, are not faring as well. Over the past year, the average Russian's monthly wage fell 9.5 percent, slipping below $450 dollars — less than in China, Serbia and Romania. According to state statistics, 50 percent of that income goes toward food, a figure on par with many African countries. What's more, 13.4 percent of all Russians now live below the poverty line ($139 a month), a proportion that is expected to grow at its fastest rate since the 1998 economic crisis.
Many Russians are fed up with the situation and with the government's handling of it. Because the new parliament must vote on the budget within 30 days of the Sept. 18 elections, time is running out for the Kremlin to suss out its budgetary problems. Medvedev clearly has his work cut out for him, and though the government has many options for bridging its budget gap, each comes with a cost.
