“The era of the new normality”: the participants of the Gaidar forum about the challenges the Russian economy

“The era of the new normality”: the participants of the Gaidar forum about the challenges the Russian economy


New economic realities and associated risks and challenges for the Russian economy were discussed by the participants of the Gaidar forum for the first day of work.

Experts and representatives of the financial block of the government shared his assessments about the state of the Russian economy, and given the forecasts for oil prices, which influence on the current situation, but also on the rate of the national currency can be called decisive.

The situation is difficult, but manageable

The participants of the discussions admitted that the economic situation in Russia can hardly be called simple. The main constraints for economic growth are not only low energy prices, but also by external factors related to Western sanctions against Russia.

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Speaking at a meeting of the Gaidar forum, Prime Minister Dmitry Medvedev acknowledged that the current challenges the Russian economy the most serious in a decade.

Speaking about the consequences of the crisis, Medvedev called the most painful decline in living standards of people, including the middle class, According to him, Russians “have become poorer, and hurt the middle class – and this is, perhaps, the most painful consequences of the economic shocks of the past year”.

The Prime Minister stressed that this happened on the background of the fact that in the last 15 years Russia has managed to achieve serious progress in the fight against poverty.

However, the Prime Minister called the situation in the economy as a whole “though and challenging but manageable.”

Universal remedy for problems in the global economy of the government, but to influence the markets is necessary and possible, said the head of the government of the Russian Federation.

In Russia now are not nearly there was in the economy in 1998, said the Prime Minister.

The era of “new normality”

As noted by the Minister of economic development Alexei Ulyukayev, Russia entered a period of restraint on economic growth. According to him, in the foreseeable future, remain drivers of the economy will cease to exist.

Estimated Ulyukayev, the period of low oil prices can last for decades. “It’s hard to say whether this low stage of the global commodity cycle, or simply the new normality. But I am convinced that this is a very long period,” the Minister warned.

However, the Minister noted that while businesses tend not to make decisions on reducing costs, personnel, change in wages policy, because he believes that sales will recover.

“They will not recover, will have to bring the costs into compliance with the new future”, warned the Minister.

In turn, Finance Minister Anton Siluanov noted the need to adapt to the new realities on the part of state-owned companies, which occupies a significant place in the Russian economy.

The oil market: what is fear?

Predicting the future dynamics of prices in the energy market, the participants of the Gaidar forum were skeptical: in the face of slowing growth in the world is unlikely to be significant “turn” in the oil market. However, some of the projections are encouraging: the Minister of economic development Ulyukayev and Finance Minister Siluanov not exclude growth of prices for energy carriers, starting with the second quarter of 2016.

According to the forecasts of oil analysts and analysts of investment banks, by the end of the first quarter will begin a gradual recovery in oil prices, and the consensus forecast for 2016 is $52 per barrel, said the head of the MAYOR.

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Ulyukayev noted that it need not be afraid that the oil price will be $20, or $15 per barrel. The biggest risk that low prices will persist decades, the Minister said.

The Ministry of Finance estimates, the oil price in the first half of 2016 can be below $40 per barrel, and in the second half of the year the Ministry predicts its increase.

In turn, Deputy Chairman of Vnesheconombank Andrei Klepach expects a rise in the price of oil to $50-70 per barrel in the medium term.

The baseline scenario of the Central Bank of the Russian Federation assumes low oil prices in the first quarter of 2016 for the subsequent rapid return to the level of $50 per barrel.

Ready for anything

However, the financial authorities do not exclude the implementation of and stressful scenario in which the price of oil in 2016 will be about $30 per barrel.

As noted by the speaker, preparing the scenario stress scenario with oil prices at $25 per barrel, in which the dollar may cost more than 80 rubles.

In the base forecast of Ministry of economic development the average annual ruble rate is 63 rubles per dollar.

The Finance Ministry indicated that the average oil price “can be updated to $ 40 per barrel in the current year”.

“We have to be ready for any changes, including to 30 dollars,” said Siluanov.

Budget – in accordance with the realities

Low oil prices make adjustments to the budget strategy. The Russian Federation, recognized by the financial authorities. The Russian budget is balanced at an oil price of $82 per barrel, while the price of Urals crude oil are below $30.

If oil prices continue to fall, will require a revision of the budget, warned Medvedev. “It is to be understood, need to prepare for the worst-case scenario, as is done in other countries”, – said the head of the Cabinet of Ministers.

The Finance Ministry believe: the ministries and agencies for 10% spending cuts in 2016, which will bring budget savings of more than 500 billion rubles.

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According to Siluanov, the ten percent cost reduction can not be called a sequestration. “The sequester is happening when cutting the budget: you have to cancel a contract, violate Treaty obligations”. We brought the same limits, now the Agency, not signing contracts, choose the most important expenses and will provide us with a return proposals,” the Minister explained.

Estimates of the former Minister of Finance Alexei Kudrin, reduction of budget expenditures by 10% – an optimistic forecast in the current situation. The increased tax burden is inevitable in the conditions of budget deficit and the fall in oil prices, as did he.

However, in the opinion of the speaker, to revise the budget prematurely. In highly volatile markets “do not need without the need to yank the beneficiaries”, the Minister explained.

The budget deficit in the current situation should rather be financed by increasing the national debt than spending reserves, said the first Deputy Chairman of the CBR Ksenia Yudaeva.

“Since the risks in commodity markets is high, in our view, the priority in the current situation should be given to debt financing and conservation reserves in case of implementing more complex scenarios,” she explained.

The “Dutch disease” retreats?

Addressing the participants of the Gaidar forum, Medvedev noted that, despite the difficulties, Russia has no right to yield to the sentiment of economic decadence and balance the level of growth was “plus minus zero”. According to him, such a setup would have opened the way to prolonged recession,” he said.

Medvedev stressed that the problem of stagnation is not confined to Russia. “This topic is in the spotlight of the world’s leading experts that try to offer additional stimulus tools,” he said. According to the head of the Cabinet of Ministers, some sectors of the Russian economy have increased their efficiency.

“Now the conditions for reindustrialization of the country, even improved, Russia stops hurting “Dutch disease,” in which excessively strong national currency makes the products of their own industry uncompetitive,” – said the Medvedev.