Reuters Vladimir Putin's emphatic win in Sunday's presidential election has come at the cost of hundreds of billions of dollars in spending promises that could sow the seeds of an economic crisis in Russia before his six-year term is out. Putin, who received 64 percent of the vote with nearly all ballots counted, shored up his base by throwing money at everything from nuclear missiles to kindergartens, making the overburdened budget more dependent than ever on oil prices. The 59-year-old premier, returning to the Kremlin for a third term, has put the cost of promised public sector pay rises at 1.5 percent of gross domestic product (GDP) — around $30 billion per annum — in the coming years. When the other new social spending commitments are added, Finance Minister Anton Siluanov told Reuters, the full cost may be up to 2 percent of GDP each year. A ministry source says privately that the figure could reach 3 percent by 2018. An independent assessment by London-based consultancy Capital Economics calculates the total bill for election-related promises will be even higher, reaching 4.8 trillion roubles ($165 billion) per annum, or 4-5 percent of GDP, by 2018. Whatever the true total, Russia's already overstretched budget will be hard-pushed to find it. “The higher oil price gives them more money to throw around ahead of the elections and after the elections, but at what cost?” said Neil Shearing, chief economist at Capital Economics. “Russia can't keep relying on expenditure to sustain growth.” Putin's campaign promises include pledges to raise salaries for doctors and university professors to double the regional average by 2018. Schoolteachers, meanwhile, have been promised pay at least in line with the average. Other pledges include a boost in child allowances, higher student grants, and an end to kindergarten waiting lists. An analysis by Russian audit firm FBK puts the cost of these social spending pledges at 9.9 trillion roubles ($340 billion) through to 2018 , rising from 1.1 trillion roubles in 2012 to 1.7 trillion roubles per annum by 2018. “It is troubling overall, definitely so,” said Vladimir Tikhomirov, chief economist at Otkritie brokerage in Moscow. “I'm not questioning the need for teachers and doctors to receive higher wages, but the question of course is how this could be met.” Over the last five years, total government spending has already risen from below 30 percent of GDP to almost 40 percent. And it is now climbing even more rapidly, as Putin's government delivers on previous commitments, such as higher pay for the military and the police, made to coincide with the vote. In the first two months of 2012, spending rose by 37 percent compared to a year earlier. That's more than twice the 14 percent increase pencilled in for 2012 - itself more than double expected inflation of 6 percent. The official estimates of the additional spending required in the years ahead do not include previous spending commitments reiterated during the campaign, such as on defence. Putin has committed to spend some 23 trillion roubles ($790 billion) by 2020 to re-equip the military, as he cements support among the two million Russians who work in the sprawling military-industrial complex inherited from Soviet times. These expenditures alone will require additional spending of 2.2 percent of GDP per annum by 2018, according to Capital Economics, similar to all of Putin's social spending commitments put together. __
