Anti-crisis State Policy in Russia

Transcription

1 1 Anti-crisis State Policy in Russia Vera Kononova Institute for Complex Strategic Studies 1 December 2016

2 Seminar Outline 1. Anti-crisis Policy Goals The main goals and targets adopted by the Government of Russia and the Central Bank of Russia in Anti-crisis activities of the Central Bank of Russia Monetary tightening and banking regulations Free float ruble exchange rate 3. Anti-crisis policy of the Government of Russia Set of industrial policy measures (interest rate subsidies, project financing), budget subsidies for the certain kinds of loans Budget conservation as a limitation on Government initiatives

3 1. Anti-crisis Policy Goals

4 Goals of fiscal and monetary authorities The Government of the Russian Federation The Central Bank of the Russian Federation We have a very complex task: to conduct structural reforms and prevent decline in living standards Multiple goals Our main goal is to slow down inflation to 4% Single goal

5 Multiple goals of the Government Short-term goals Long-term goals Ensure social stability (support for the most vulnerable groups) Support of backbone enterprises Support of the most affected industries (automobile industry, agriculture, housing construction, transportation and tourism services) Budget economy (maximum deficit 3% GDP per year) Structural reforms (accelerated dev-t of non-commodities production) and import substitution Institutional reform (the task to create encouraging environment for doing business) Modernization of infrastructure, facilities and technologies Budget economy (zero deficit) Anti-crisis plans

6 Inflation targeting goal of the Central Bank The Central Bank of Russia (CBR) adopted the inflation targeting policy that became the main direction of it s activities in Actual and targeted inflation Bank of Russia forecast Actual Mid-term goal Source: Rosstat, CBR Source: CBR Oct. 2016: annual inflation is down to 6,1%. The CBR forecast for inflation in 2016 is 5,5-6,0%.

7 How the anti-crisis policy is being conducted The specific entities are responsible for monitoring the economic situation and implementation of anti-crisis action plans Governmental Commission for economic development and integration (Ministers, head of the CBR, heads of the major banks and development institutions, governors, academic experts) Interdepartmental Working Group (deputy ministers, deputy head of the CBR, rep-s of other departments and entities) The Anti-crisis Plans of the Government 2015 Economic and Social Stability Plan for 2015 (60 items) 4 interdepartmental working groups under Ministry of Finance, Ministry of Economic Development, Ministry of Industry, Ministry of Agriculture 2016 Government s action plan for 2016 (120 items) Companies, industrial unions Regional anti-crisis commissions

8 2. Anti-crisis activities of the Central Bank of Russia

9 Main directions of the CBR policy Policy instruments in High interest rates - to stop capital outflow and bring the inflation down Main building of the Central Bank of Russia (Moscow) Tight bank control (compliance with the new banking regulations) Free float of ruble exchange rate (since 2014)

10 Interest rate policy in After the sharp increase in Dec 2014, the key rate of the CBR is still kept on high level of 10%. This results in the high interest rates for all kinds of loans. Interest rates for loans to non-financials (<1 year) % Date CBR Key rate, % Feb 3, ,75 Mar 3, ,0 Apr 28, ,5 Jul 28, ,0 Nov 5, ,5 Dec 12, ,5 Dec 16, ,0 Feb 2, ,0 Mar 16, ,0 May 5, ,5 Jun 16, ,5 Aug 3, ,0 0 EC USA China Russia Source: CBR Jun 14, ,5 Sep 19, present 10,0

11 Banking system control Since 2014, the CBR follows the policy of strict banking control. Failure to comply with the rules of the CBR results in license revocation License revocation summary In 2014 the regulator revoked licenses from 84 credit institutions for the unsatisfactory quality of assets, loss of capital, risky lending policies and dubious transit transactions In 2015 the licenses were revoked from 93 credit institutions In Q1-Q from 77 credit institutions As of Oct.1, 2016, Russian banking system consisted of 600 banks Source: CBR

12 Ruble exchange rate In November 2014 the CBR declared the free float of ruble exchange rate. That was followed by a 2-fold devaluation and sharp increase in volatility. Nominal and real exchange rates for RUB/USD Deviation of RUB/USD exchange rate from year average Official exchange rate, RUR/USD, end of period Oct Real exchange rate index, RUR/USD, 1997 = 100% (right scale) Source: CBR, ICSS estimates

13 3. Anti-crisis policy of the Government

14 Main directions of the Government policy The most important policy instruments in The House of the Government of Russia (Moscow) Providing accessible loans for selected investment projects Regional development mechanisms Attempts to minimize budget deficit

15 Accessible loans The government started a group of programs that aim to provide cheaper funding for the selected investment projects Bank Joins the program (if satisfies the criteria) Company Takes a loan (with lower interest rate) Government Agency (ministry or development institution) Announces the program and selects the banks Provides subsidies covering a certain part of interest payments

16 Accessible loans These programs are highly demanded by businesses, however, the amount of funding is limited Programs Interest rate, % Comments Project Financing Program (2015) Loans from Industrial Development Fund ( ) Home Loans with Government Support ( ) 11-11,5% Banks provide loans for selected priority projects (then the loans are refinanced by the CBR). In projects received 232,5 bln rub (3 bln EUR). 5% In 2015 the Fund selected 74 priority projects out of 1282 applications. Total funding was 20 bln rub (~250 mln EUR), in 2016 another 20 bln rub is expected. < 12% In 2015 the authorized banks received a 3,5% budget subsidy for home loans with lower rate (12% or less) for new construction. The share of subsidized loans on home loan market was about 40-50% in Source: Acts of RF Government, mass media

17 Regional Development Mechanisms The Far East of Russia is priority region, where accelerated development territories and other mechanisms were introduced in Government of Russia The Regions of Far East of Russia Ministry for Development of Far East Far East Development Corporation Far East Development Fund Accelerated development territories 9 low-tax and duty-free business parks with new infrastructure Free Port Vladivostok 3 low-tax and duty-free logistics zones As of November 2016, 372 projects are in progress in the Far East regions

18 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% The Task of Budget Conservation The task of minimization of federal budget deficit imposes limitations on many Government anti-crisis initiatives % GDP 7,4% Federal budget balance 5,4% 4,1% -6,0% -3,9% 0,8% -0,1% -0,5% -0,4% -2,6% Source: Ministry of Finance Nov. 2016: the expected federal budget deficit for 2016 is 3,7% GDP USD bln Sovereign oil funds National Wealth Fund Reserve Fund Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Source: Ministry of Finance

19 Decline of oil and gas revenues Before 2015, about 50% of federal budget revenues were oil and gas revenues. In 2015 their share decreased to 42,9%, in Q1-Q to 37% Export duties on oil, gas and petroleum products Revenues from Natural resource Tax on oil and gas The dropdown in these revenues was observed despite the devaluation of ruble 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Structure of federal budget revenues other revenues oil and gas revenues Source: Ministry of Finance

20 New National Projects The anti-crisis activities tend to be grouped into new National Projects the integral part of the currently developed strategic planning system New institution: the Council for Strategic Development and Priority Projects (since June 2016) The head of the Council is the President of Russia Priorities under discussion: Healthcare, Education, Housing Small business development Transportation: quality and safety Non-commodity export (machinery and equipment production, food and agriculture production) Environment protection (recycling technologies)

21 Thank you for your attention!