22:02 GMT +322 October 2018
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    2006 social spending may fuel inflation

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    MOSCOW, August 18 (RIA Novosti) - Russian experts commented on the government-approved 2006 draft budget, saying it was investment-oriented, but increased social spending would increase inflation.

    "The 2006 draft budget corresponds to the objective set to boost the economy due to its investment orientation. But the growth of non-interest-bearing spending may negatively affect inflation rates," Andrei Dubinsky, a member of the general council of the Business Russia public organization, said Thursday.

    According to the expert, it is necessary to develop target programs as compensatory measures to support small and medium business serving the consumer market.

    Sergei Abramov, a member of the organization's coordinating committee, said high fuel prices made the government increase budget workers' wages, diversify the economy and expand state investment.

    "The 2006 budget may become a catalyst for economic growth," he said.

    Anton Struchenevsky, an expert at the investment company Troika Dialog, said raising social spending was a necessary measure.

    "The next year is the beginning of a new political cycle, which is why the budget social orientation, and consequently, the growth of social spending, is inevitable," he said.

    According to Struchenevsky, the planned increase in budget spending from 16.6% of the GDP in 2005 to 17.5% in 2006 is not critical, but soaring government spending will influence inflation rates.

    "The government's forecast of next year's 7-8.5% inflation looks unrealistic. It is likely to be 10%, considering the growth in budget spending," Struchenevsky said.

    There are no threats to Russia's financial stability since next year's budget will have a surplus, he said.

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