The countercyclical effect of fiscal rules in Russia

The instability of economic processes fuels the inconsistency of the revenue flow to the budget system. In order to overcome the cyclical nature of the budget process, which depends on cyclical fluctuations of economic conditions, fiscal rules are actively applied worldwide. The purpose of the study is to assess the countercyclical effect of the budget rules in force in Russia. The theory of economic cycles constitutes the methodological basis of the research. The paper employs structural, logical and comparative analysis, elaboration, scientific generalisation, and correlation analysis. The evidence is the data obtained from the Federal State Statistics Service of Russia for 2000–2023. The paper examines business cycles in Russia, as well as the cycles of revenues and expenditures of the consolidated budget, the cycles of formation and use of Russian sovereign wealth funds over the indicated period. The correlation analysis found that the revenues of the consolidated budget of Russia are procyclical with the correlation coefficient of the budget revenues and GDP growth rates equal to 0.8029. The procyclical nature of the budget expenditures has decreased due to the fiscal rules applied since 2004 with the correlation coefficient of the budget expenditures and GDP growth rates amounting to 0.5223. However, the procyclical nature of budget expenditures has not been overcome completely. Among them only the procyclical nature of healthcare expenditures has been reduced, while budget expenditures on education and housing and utilities keep on being significantly and to a greater extent dependent on the fluctuations of economic conditions. The paper proposes invoking the principle of fixed expenditures when applying budget rules, which assumes avoiding a decrease in budget expenditures compared to the previous year, calculated at comparable prices.