Making the move more unusual, the cuts come midway through a previously approved spending plan, and they reflect a shift in strategy away from reliance on consumer spending. In Russia, budgets are approved for three years in advance rather than year by year.

The Finance Ministry now projects that revenue will be 3.5 percent lower in 2014 and 7 percent lower in 2015 than it predicted a year ago, when the government of President Vladimir V. Putin approved the three-year spending plan.

Under the revised budget, military salaries will be frozen next year and the government will put less money into a pension fund for future retirees. It will use the money to meet current pension obligations instead.

“The budget turned out really tough,” Dmitri A. Medvedev, the prime minister and a former president, said in comments carried by Russian news agencies on Thursday when he presented the new plan. “We had to work off the real situation in the economy in our country, and in the world.”

The problems for Russia’s economy run deeper than its overwhelming dependence on oil and gas revenue, which account for more than half the federal budget.

Wages that for years rose faster than labor productivity under economic policies that made Mr. Putin widely popular have now priced Russians out of the market for many goods and services globally.

Russia’s economy is now growing more slowly than that of the United States. In the second quarter, the gross domestic product rose 1.2 percent in Russia, compared with 2.5 percent in the United States.

Officials spent the summer debating how to reverse the slowing of economic growth here.

In a speech in June, Mr. Putin suggested the Kremlin would try to prime the economy with government spending by dipping into about $171 billion in reserves in sovereign wealth funds to finance infrastructure projects like modernizing the trans-Siberian railway. Those spending plans were never carried out.

Since then, the economic policy team has changed direction, economists say, and the new approach became clear with the release of the plan for cutting the three-year budget rather than running higher deficits.

“They want to change the model of growth in Russia’s economy” away from dependence on consumer spending, Vladimir I. Tikhomirov, chief economist at the Otkritie brokerage house, said of the new policy. “The government and central bank have decided their top priority is to bring inflation down.”

This shift, Mr. Tikhomirov said, reflects a deep-seated aversion by Mr. Putin to foreign borrowing of the type that made the Soviet Union beholden to Western banks in its later years. In light of the worsening slowdown here, further stimulus would require foreign borrowing.

“It goes against normal economic policy” to cut spending in the face of an economic slowdown, Mr. Tikhomirov said.

The new Russian policy instead retraces a growth strategy followed successfully in the late 1990s by Eastern European nations like Poland, which focused intensely on controlling inflation and borrowing costs for businesses. Though this brought a temporary slowdown, and even recession in some countries, business activity picked up as rates came down.

The Russian government predicted several years of slow growth of about 3 percent, down from the 4.5 percent previously forecast.

But inflation, the bane of post-Soviet Russia for many years, is projected to drop to 4.5 to 5.5 percent next year and below 5 percent in subsequent years, from around 6 percent this year.

Without new growth produced by low interest rates in the later part of this decade, the government will struggle to meet demands for increased spending on pensions for the country’s aging population.

In the short term, as inflation is brought under control and before growth picks up, Mr. Putin could find his political support eroding. Mr. Tikhomirov, the Otkritie economist, said the policy should start showing results in 2016 or so, before Mr. Putin is up for re-election in 2018.

The government must submit the plan to the Parliament for approval by Oct. 1, though major changes are unlikely.

Article source: http://www.nytimes.com/2013/09/20/business/global/russia-cuts-budget-to-try-to-spur-growth.html?partner=rss&emc=rss