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Budget deficit reduction trend persists in EEU countries

Reduction of the budget deficit in the countries of the Eurasian Economic Union continued in 2018, and an increase in fiscal reserves of the states was registered. A report of the Eurasian Development Bank (EDB) says.

According to it, recent years’ achievements in the field of reduction inflation and strengthening economic growth along with improving the situation in global commodity markets have created prerequisites for increasing fiscal sustainability in most countries of the region.

Since 2017, there has been a rapid growth in incomes over expenditure in the EDB countries, which has led to a reduction in budget deficits. The growth of the state budget deficit in the last year was registered only in Kazakhstan, mainly due to the growth of targeted expenditures for the rehabilitation of the country’s financial system.

Despite the limited increase in expenditures, the social orientation of budgets has been preserved in all the economies of the region.

In January-September 2018, the state budget deficit in Kazakhstan amounted to 0.3 percent of GDP (3 percent of GDP in 2017), in Kyrgyzstan — 0.02 percent of GDP (1.8 percent of GDP), in Armenia — 0.4 percent of GDP (2.3 percent of GDP). Russia and Belarus ran a budget surplus of 3.5 and 3.8 percent of GDP respectively.

The exception was Tajikistan, where an increase in the state budget deficit in September of this year was accompanied by the implementation of large-scale infrastructure projects.

«The improvement in the fiscal position in the exporting countries of hydrocarbons is partly a consequence of the favorable situation on the world oil market. In Kyrgyzstan and Armenia, fiscal consolidation in the first nine months of 2018 was achieved by reducing government spending.

The draft budgets of most states in the region for the medium term are formed with a bias towards limiting fiscal risks. Further strengthening of the budgets of the countries in the region will help avoid the accumulation of internal imbalances, strengthen the growth potential in the medium term and increase the resilience of economies to external shocks,» the report says.

«The formation of a sustainable tendency to reduction of the level of state debt will reduce the vulnerability of economies to external shocks and increase the sustainability of the public sector. In general, strengthening of the budgets of the EDB states creates the basis for enhancing investment growth, stimulating an increase in the potential rates of economic development,» EDB experts believe.