Oil prices, the budget and pension system: what Putin said about the Russian economy

Oil prices, the budget and pension system: what Putin said about the Russian economy

MOSCOW, December 17. The Russian economy passed the peak of the crisis, some industries show strong growth, said during a press conference, Russian President Vladimir Putin, warning that further decline in oil prices, the government nevertheless can again recalculate the budget based on even lower oil prices.

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Putin noted the decline in external debt and net inflow of capital as a sign of a healthy state of the economy and renewed interest from investors. He added that debt reduction is a positive side to the sanctions imposed by Western countries because of the events in Ukraine.

“Statistics show that the Russian economy the crisis has passed the peak in any case of crisis”, – Putin said, answering the question, how relevant is the forecast made at last year’s press conference that the economic recovery will take two years.

Comparing the current economic situation with oil prices at around $37 per barrel last year, when prices were at $100 a barrel, Putin has remembered a joke that a black stripe in life can be perceived as white if the next strip is even more black.

Putin at the very beginning of the press conference said that he was satisfied with the work of the government and supported the policy of the Bank of Russia, thus denying rumours of a possible reshuffle in the government and their discontent with the policies of the Central Bank, which, according to some entrepreneurs, is holding its key interest rate too high.


Oil prices for 30 years


“To lower the rate is not bare at the Central Bank, as it did in Soviet times and in the planned economy, and to help the Central Bank and the government to suppress inflation and reduce devaluation risks and expectations”, – said Putin.

Putin believes that the government was forced to revise the 2015 budget due to falling oil prices, the basic goods of the Russian export. Next year’s budget while calculated from rates $50 per barrel. Putin called those numbers overly optimistic. Budget 2016 adopted by the Federal Assembly and signed by the President.

“We estimate next year’s budget from this figure, it is a very optimistic estimate – $50 per barrel. But now how much she’s already thirty-eight? So we will have, probably, and there’s something to correct,” – said Putin.

However, Putin noted the growth in agricultural production, domestic air transportation, as well as increase capacity in the power sector and port infrastructure.

Do not burn the reserves

During the press conference, Putin proposed to intensify the efforts for the sale of blocks of shares in large companies with state participation, including Rosneft, Aeroflot and Sovkomflot. Currently in the budget 2016 pledged 33 billion in revenues from privatization, however, earlier the Minister of Finance of the Russian Federation Anton Siluanov assumed that only the sale of a stake in Rosneft can bring to the state budget of 500 billion rubles, or 3.6% of revenues in 2016.

“I do not exclude that in order not to burn the reserves in order to provide income and to change the structure of these large companies, the government and go to these decisions (privatization – approx. ed.)”, – Putin said. He added that the state will retain a controlling stake in these companies and stressed that privatization will improve their effectiveness.

Putin also acknowledged that problems remain with high levels of debt in several regions, that creates an additional burden on the Federal budget in which to support regional budgets provided by 310 billion rubles.

“But the most important still is that these loans, which take the regions that the funds obtained in this way was aimed at solving major and minor problems,” Putin said, naming one of such tasks is the creation of new jobs.

In addition, Putin urged the heads of state companies, which are often criticized for high salaries, to spend more on charity.

Not to undermine the pension system

Despite the fall in oil prices and other budget issues, Putin said that the government will index pensions to inflation next year, when elections to the State Duma.

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“We will see what will happen in the economy. And I’d love so that we in actual inflation 2016 at least were able to resolve this issue. I don’t know it or not, we must proceed from reality and just can’t break the budget, because in the end everyone will be worse,” Putin said.

He also recognized the need to increase the pension age in the future, but declined to talk about timing.

“When to do that? I don’t have an answer for it. It will have to do in all countries this is done, in all who surround us. But when it will need to be done before I would like to talk about it publicly, because even we don’t have,” said Putin, urging to raise the age in time so as not to undermine the pension system.

To give the opportunity to reduce the tax burden

Putin hinted that in case of further fall in oil prices, the government can reduce the burden on the oil industry, which has been increased due to the increase of tax on mineral extraction in that the export duty has been left unchanged.

“The government has put pressure. It is important that it just didn’t last forever, and here I am with the industry agreed”, – said Putin.

He also stated that he would be very attentive to the expenditure of funds from the national welfare Fund (NWF), which funded several major infrastructure projects, including the construction of the TRANS-Siberian and Baikal-Amur Railways.

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Putin also recalled that the idea of road tax, which should bring 40 billion in road funds, was the result of fiscal imbalances in the transport sector, which has led to the fact that more and more cargo was transported by trucks, whose owners do not pay tax on the infrastructure in amounts comparable to other modes of transport.

The introduction of the road tax from 1 November sparked protests by drivers in different regions of the country.

Putin also noted the existence of “gray schemes” in road transport as a result of the abolition of licensing in 2008 under the pretext of development of private entrepreneurship. Putin said that the government should help “the truck” to get out of such schemes.

“You know, I’m still from a working class family, and I understand that these guys work, they work, sit behind the wheel, but it is necessary to leave still from “grey” schemes. And I want to support them, believe me”, – Putin said.

As possible measures to make the industry out of the shadows Putin called the introduction of the “budget” of the patent, and the possible abolition of the transport tax in the industry

“At least for the trucks that have to pay for mileage, it has to be done. I very much hope that the government in the near future – in the beginning of the year – this will do it,” said the President of the Russian Federation.