Faced with a wave of mass protests the Kremlin has announced a social package of spending worth RUB500bn ($6.7bn) to reduce the number of disaffected before the elections.

At the same time, as bne IntelliNews has reported, the government held a meeting last week and intends to completely overhaul the 12 national projects to speed up spending and shift more of its early efforts into socially orientated programmes.

The Kremlin is in a rush to score some noticeable victories to head off a revival of the protests when the warmer weather comes and to support its efforts to promote the ruling, but highly unpopular, United Russia Party ahead of important Duma elections in September.

The new social spending package has been rushed through in the last week as the Kremlin reacts to the wave of protests sparked by jailing of anti-corruption activist and opposition politician Alexei Navalny who was sentenced to 2.8 years in prison on February 2.

Sources in the Russian White House told Reuters that the authorities are preparing a new package of state support to the population for at least RUB500bn rubles, or 0.5% of GDP, and Vladimir Putin may announce it in the coming weeks during his annual message to the Federal Assembly. A date for the speech has not been set yet, but may happen in February.

By the end of 2020, the real disposable income of Russians fell by a third, Rosstat reported at the end of January. Now they are 10% behind the level of 2013, which ended a period of stable growth in citizens' incomes, reports The Bell.

Since then, significant growth (+ 1%) was recorded only in 2019, in 2018 it was 0.1%, and in all other years, the incomes of Russians were falling. The beginning of 2021 so far does not look very rosy. January inflation came in at 5.25 – over the Central Bank of Russia (CBR) 4% target level.

Pressure on the budget

New social spending may put pressure on the budget, which has already been hit by the multiple shocks of 2020: RUB500bn is more than half of the average annual savings budgeted for 2021-2023 from proposed budget spending cuts in 2021 and about 2.5% of its entire annual revenues.

However, rather than new spending, analysts believe that much of the RUB500bn will comes from the redistribution of existing spending of budgetary funds, according to Alexander Suslin, head of the Fiscal Policy direction of the Economic Expert Group as cited by The Bell.

Most likely, the money will be distributed in one way or another to low-income strata of citizens – pensioners, large families, people with low income and state employees, suggests Sofya Donets, an economist at Renaissance Capital for Russia and the CIS.

As bne IntelliNews reported earlier, similar plans were outlined in the revamp of the 12 national projects, with the most vulnerable social groups being targeted for immediate help, but plans for supporting the majority of society have not been decided yet.

Aid to low-income groups is also expected to give the economy a boost, as they tend to immediately spend all their money on consumption.