The government in 2015: facing the crisis

The government in 2015: facing the crisis

MOSCOW, December 30. The outgoing year for the Cabinet of Ministers was marked by the economic crisis. For the first time since 2009, the government was operating under at the same time declining GDP, a sharp fall in oil prices and weakening ruble. This time, however, the negative trend of the economy was not as dramatic as six years ago – the Cabinet is waiting for the fall of GDP by almost 4% and in 2009 it was close to 8%.

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As noted at the beginning of December, Prime Minister Dmitry Medvedev in an interview with Russian TV channels, largely through the most difficult period this has been developed in January, the anti-crisis plan. At the same time, in the situation of uncertainty the government for the first time in six years has prepared for next year not three-year and annual budget with a deficit of 3% of GDP.

Remains relevant and the topic of import substitution that emerged in 2014 after the establishment of the Russia food embargo in response to economic sanctions of Western countries. In the social sphere resonance of the discussion revolved around raising the retirement age and extend to 2016 the freeze of pension savings.

Adjustments to the work of the government and was made a foreign policy conjuncture. Relevant ministries and agencies engaged in evacuation of Russians from Egypt, and then Turkey after the President’s decision on restriction of flights with these countries. The head of state, the government has set specific parameters of the economic sanctions against Ankara after the incident with the downed su-24 bomber in the skies over Syria.

Almost without losses

With all the unstable economic situation, the structure of the government remained relatively stable and has not undergone a significant change, despite the frequent rumors about the imminent dissolution of the Cabinet, or major structural rearrangements.

The main “loss” was the elimination of Mindcrime in July 2015. His features took on the Ministry of economic development. The government then decided to join the FAS and FTS, by creating a “megaregulator” in the sphere of natural monopolies.

President Vladimir Putin at a big press conference in mid-December stated that, in General, satisfied with the work of the Cabinet, thus denying rumours of a possible reshuffle in the government. “As satisfied or not satisfied – in General, I believe that the work is satisfactory. But, of course, can and should do better,” said Putin.

The anti-crisis plan

The sharp fall in oil prices began in the second half of 2014 following the cooling of relations between Russia and Western countries on the background of the conflict in Ukraine and the annexation of Crimea to the Russian Federation.

On this fall responded to the ruble (by mid-December fallen to 80 rubles per dollar and 100 roubles per Euro), overclocked inflation. The next blow was a sharp increase in December, the key rate of the Central Bank – from 10.5% to 17%. All of this dramatically slowed down and so the sagging economy. The need for prompt action became inevitable for the government.

2015 the Cabinet began dynamically with the formation of “anti-crisis” Fund and develop a plan of priority measures to support various sectors of the economy in conditions of crisis. This plan consisted of “60 steps”, their total value was estimated at 2.3 trillion rubles taking into account back in late 2014 the decision on recapitalization of the largest banks by 1 trillion rubles through the provision of capital in bonds (OFZ).

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In the end, from the Federal budget on anti-crisis measures laid 602,5 billion rubles, and from “anti-crisis” Fund – 206,7 billion rubles as support to credit institutions, they have had to share of “crisis” bond with the KLA, “Russian grids” and the STLC, by the same banks in the end were on OFZ 838 billion.

The anti-crisis plan of the government related to the support of import substitution and export of non-oil goods, development of small and medium-sized businesses. It was agreed to reduce budget expenditures by 10 percent. Resumed work “anti-crisis” Commission headed by first Deputy Prime Minister Igor Shuvalov, who took the decision to issue state guarantees to strategic companies.

To support the construction of the Cabinet has launched a program of preferential mortgage interest rate for ultimate borrowers 13% (after reducing the key rate to 14% reduced the mortgage rate was 12%). At the end of December, Medvedev noted that the programme had allocated about 170 thousand mortgage loans at subsidized rate of over $ 300 billion.

The substitution

The discussion of this issue at the government level have intensified in 2014 amid Western sanctions and a retaliatory food embargo. At the same time, the President urged the Cabinet to do the substitution only in those areas where this will give additional impetus to development.

The government during the year distributed grants to support various sectors of the economy. In full force earned the industrial development Foundation with funding of 20 billion rubles. Implemented the program of project financing. In parallel with import substitution, the government was engaged in support of export-oriented production. Thus, the spring structures on the basis of Vnesheconombank was established Russian export centre, which, as noted, in the mode of “one window” will help Russian enterprises to develop new markets.

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According to Dmitry Medvedev, although the process of import substitution in the Russian Federation is not as fast as we would like, but progress is being made, and in full, this way Russia is able to pass in ten years. As a positive example he called agriculture, which was previously unprofitable, but in recent years has become competitive compared with the products of Western agribusiness. Positive changes, the Cabinet notes in the chemical industry and in pharmaceuticals.

In a number of critical sectors of the economy, including in the defense industry, the implementation of import substitution programs will need two to three years, said earlier the head of Ministry of industry and trade Denis Mantrov. Almost all projects aimed at import substitution receive state support, developed 20 sectoral plans importozameschenie, including more than 2.2 thousand of the priority technology areas.

Foreign influence

On the government’s work this year was influenced by such foreign policy decisions as the termination of air links with Egypt and Turkey with the subsequent imposition of economic sanctions against Ankara.

In November, the President has suspended flights to Egypt after the disaster of the Russian aircraft A321 of airline “Kogalymavia” in the Sinai on October 31. At the same time Putin ordered the government to return to their homeland vacationing in Egypt Russian citizens. For security purposes tourists back from Egypt without Luggage, it was delivered separately by the MOE and the Ministry of defense, this work has attracted, and the “Mail of Russia”. All of Egypt was taken over 89 thousand Russians.

Flights with Egypt will be restored after the authorities of the Arab Republic can ensure security of passengers in its airports, but, as consider in the government and the presidential administration in the near future the resumption of flights is not worth waiting.

The reason of cooling of relations with Turkey was downed in the end of November over Syria Russian bomber su-24. In this case, the traffic stopped completely, the government has introduced additional security measures on regular flights, the ban on Charter flights, as well as for sale of package tours to that country. But this time the Russians for security purposes, the authorities decided to bring home – just returned home more than 9 thousand tourists from Russia.

Following this, on behalf of the President, the government has prepared a list of prohibited to import into Russia of goods from Turkey, first of all, the food, and the list of services that are prohibited to lend in Russia Turkish companies or companies controlled by Turkish nationals or companies of that country.

In the Ministry of industry and trade reported that he was preparing another list of “forbidden” Turkish goods, which will affect, in particular, the sphere of light industry.

Prime Minister Dmitry Medvedev expressed confidence that sanctions against Turkey will not affect the growth of prices in 2016. Their contribution to inflation he estimated at 0.2-0.5 percentage points. In addition the government has repeatedly stressed that Russia “has no problem to refuse to cooperate fully with Turkey”.

Discussion of the year

So in the past year can be called acute discussion of extending the moratorium on formation of accumulative part of pension for next year. This measure will increase the incomes of the FIU in 2016 342,2 billion and reduce by that amount the size of transfers from the Federal budget.

Freezing cumulative part of the pension is traditionally assessed by financial market participants negatively, as it withdraws from this sector a significant part of “long money” needed for its development. And if for the first time (in 2014) the freeze was due to the need of “Stripping” of pension funds, frozen for 2015, the Cabinet has already explained the need “to patch holes” in the budget. Representatives of the government in the beginning of the year was assured that such a measure no longer apply. However, the crisis has made their adjustments. Before the Cabinet was a choice – or “freezing”, or raising the retirement age. In the end, the decision was made in favor of another seizure. But on the question of the gradual increase of the retirement age have made the first steps. Resolved, that this measure will concern officials, but only from 2017.

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Another hot topic was the introduction from November 15 of the system of charging heavy goods vehicles above 12 tonnes for travel on Federal highways – “Plato”. Truck owners came out to protest and demanded to cancel the implementation of this system, complaining about its opacity, high tariffs, and the overall strengthening of the tax burden on the transport company in addition to the existing transport tax and excises on gasoline.

The government to abolish the system refused, but for the first time almost by half reduced for truckers rate – until 29 February 2016, 1,53 rbl. for 1 km. From 1 March 2016 to 31 December 2018 inclusive rate will rise to 3.06 rubles./km, and from 2019 will be installed on the previously agreed level in 3,73 RUB./km. in addition, it was decided that since the launch of the system of penalties for non-payment of fees will be charged only on the territory of Moscow region. On the roads throughout the Russian Federation, the fines will apply only from 1 may 2016.

In addition, the government on behalf of the President is drafting a bill to abolish the vehicle tax for heavy vehicles, which is expected to take in the spring. Last week Putin criticized the Cabinet for the sluggishness in resolving this issue.

The December leap and objectives for the next year

At the end of the year a new impetus to the government gave the President’s address to the Federal Assembly. After members of the government in a few days had prepared a draft law on the extension of the law on Amnesty of capital for another 6 months – until July 1, 2016, to extend for two years, until the end of 2018 – payments program of the parent capital.

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With regard to the coming year, one of the major risks seen by the continuing adverse macroeconomic environment. President Putin has already indicated that due to low oil prices (less than $40 per barrel) the government in early 2016 will promptly amend the budget, which is pegged based on the average price of oil at $50 a barrel.

The head of state did not rule out accelerated privatization of stakes in major state-owned companies to replenish the Treasury and preservation of the accumulated reserves. The government has begun preparing a list of major assets for possible privatization, said the Minister of Finance Anton Siluanov. And his colleague of the MAYOR Alexei Ulyukayev called among the assets up for sale state stakes in Rosneft, Aeroflot, Sovcomflot and ALROSA.

Summing up the results of the outgoing year, the Prime Minister at one of the meetings was generally evaluated positively, in particular, indicating the effectiveness of the anti-crisis plan, which made it possible to concentrate economic resources on supporting the most vulnerable “spots” in the economy and in the social sphere. In addition, anti-crisis measures helped, to the extent possible, to support the process of import substitution, while maintaining the extremely low oil prices and renewed anti-Russian sanctions have yielded some positive results.

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At the same time, the government decided not to renew the plan, although some of its activities will be transferred to 2016. As explained by Deputy Prime Minister Arkady Dvorkovich, first of all, it is about supporting the automotive industry, transport engineering, light industry, housing and agriculture.

According to the Chairman of the government, the decline of the economy and production in Russia this year have been suspended, next year will be a year of growth. But from the Russian authorities this requires the creation of conditions to improve the business climate, improving the regulatory framework and strict control of the Antimonopoly legislation.

In General, Prime Minister Dmitry Medvedev expressed confidence that the challenges will continue into 2016, but the country will overcome them. “As for the difficulties some of the difficulties will remain, but there is no doubt that we will overcome them”, – assured the head of the Cabinet, noting that this year passed “with dignity, and the next year will bring new events”.