The continued weakness of Russia’s economy has led to questions about what policymakers can do to stimulate growth and, with the central bank reluctant to loosen monetary policy, there is a growing likelihood that the government will turn to fiscal measures to revive the economy. But the structural nature of Russia’s slowdown means that any fiscal expansion will have to be carefully targeted in order to have a meaningful impact on growth. A fiscal expansion targeted on public sector wages and pensions is more likely to stoke inflation than stimulate the economy.
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