Fiscal Policy and Monetary Policy

Russia

Fiscal 

Over the last decade, the Russian government has had a policy of limiting government spending, but as a result of low oil prices Russia is rethinking its fiscal policy.  The goal of limiting spending was to prevent the waste of oil revenues and instead divert them to "rainy-day" funds. Russian economists were concerned that the excess income and spending generated from oil revenues would promote excess spending thus creating an inflationary gap. However, because of the recent weak economic growth, government spending has increased and budget requirements loosened. This new fiscal policy pushed government spending to 2.1% of the GDP compared to the traditional 2% of GDP. 

Monetary

The Central Bank of Russia has been cutting interest rates since 2014 in hopes of improving economic growth and preventing deflation. The CBR announced that further rate cuts would occur gradually, but not dramatically. The belief of the CBR is that the "output" gap in Russia's economy will mean that inflation will decline further which could threaten deflation worsening Russia's recession. Furthermore, poor economic data including retail sales and construction and industrial production may further encourage rate cuts in the near future.

(CBR Governor Elvira Nabiullina)

Ukraine

Fiscal

Ukraine's fiscal policies have much to be desired for in the view of many economists. Corrupt and chronic political problems are plaguing society indicating disorganized spending practices within the government. The war in Ukraine has led to an extreme balance of payments deficit and public finances have suffered due to corruption. Public debt in Ukraine is 100% of GDP and skyrocketing interest rates have made it nearly impossible for Ukraine to improve its fiscal policies without outside support. These factors have led to an extreme decrease in GDP per person as well as a fall in Ukraine's population. 

Monetary Policy

In hopes of stabilizing the recession, Ukraine's National Bank cut its discount rate from 22% to 19%. The bank believes that inflationary pressures have subsided more recently allowing room to cut interest rates in hopes of improving trade. The discount rate will also be set at the same level as the "key policy rate" (currently 14 day CD's) in order to control short-term rates more effectively. The bank believes that the "key policy rate" should be cut further in the future to prevent a slowdown of economic growth.