The Ministry believed in iridescent prospects of the Russian economy
The Ministry of economic development of Russia made a new forecast for the next four years is moderately optimistic. It is expected gradual economic recovery, rising oil prices, slowing inflation, stabilizing the budget and increasing incomes. Not all agreed with this, and doubts were expressed both by experts and officials.
Optimists and pessimists
If you look at the history of national forecasting in the twenty-first century, we can see that the predictions generally done quite pessimistic. American official forecasters showed more optimism. In the financial crisis of 2009 in Russia and some European countries produced almost apocalyptic predictions. U.S. officials and representatives of the fed behaved much more confident and did not allow panic.
However, in the new decade, everything changed. In the most recent crisis of the Russian authorities, including the Central Bank, the Ministry of Finance and the Ministry of economic development, has repeatedly painted a more optimistic — or, more precisely, less grim than it was actually. Had to constantly adjust the prediction to the downside. In principle, this is understandable — no one could imagine that the economy will hit a perfect storm in the form of a structural crisis, sanctions and the collapse in oil prices. But the fact remains.
With faith in growth
The updated forecast is laid slightly more optimistic view for the coming few years than in the past, released in January. The final forecast will be submitted to the government in April. It is possible that he will serve as the basis for determining economic policy for the next three years. The government has been thinking of returning to a three-year budget, which was abandoned due to the instability of oil prices.
According to the baseline forecast, Russia’s GDP will shrink this year by 0.3 percent (in the January version — minus 0.8 percent). This significant improvement is difficult to explain by changes in the economic environment in recent months, as both in the past and in the present version of the oil price is set at $ 40 per barrel.
And at 40 dollars per barrel, Russia’s economy will recover, believe in the Ministry of economic development
Photo: Vitaly of Ankov / RIA Novosti
This part of the forecast looks much better than most independent observers. Just look at the predictions of the “big three” rating agencies. Even traditionally loyal to Russia, Fitch sees a decline in GDP in 2016 to 1 percent, S&P expects economic contraction of 1.4 percent, and Moody’s — and at 2.5 percent. No less grimly assess the situation and Russian organizations. Thus, the Center of the Higher school of Economics, which released its forecast a day earlier, predicts a GDP decline of 1.6 percent, oil price of 35 dollars per barrel. And at $ 45 dollars, the decline softened to 0.8 percent, but it’s still worse than the Ministry of economic development.
As a three-year perspective, and here we find a significant difference between the evaluations of the Ministry and the HSE. The base version of the official forecast of the total contraction in the economy in 2015-2018 is expected to be 0.5 percent, and GDP growth should return next year, and by steady growth (over 1%) to 2018-mu. Development center even in the optimistic scenario, in a situation of relatively high oil prices ($50 a barrel starting next year) predicts a total fall of 5.6 per cent and the beginning of full-fledged recovery only in 2019. And return to pre-crisis GDP in the foreseeable future will not succeed at all. In a variant of same with prices in the $ 35-40 per barrel, the overall decline will be more than 8 percent of GDP, which already puts the situation in Russia to the brink of economic depression.
The source of growth is in the pockets of the Russians
The Ministry of economic development, based on these figures, special hopes are pinned on consumer demand. The income this year will decline in real terms by only 3.3 percent (in 2015 — just 10 percent). From 2017 is expected to increase. This will stimulate companies to increase commercial reserves that have a positive impact on GDP growth. Imports will grow slowly enough so that the Russians will be more to spend on Russian goods and services and trade balance will show a significant plus (exports in three years will increase by approximately $ 60 billion, about 20 percent).
This forecast looks interesting on the background of the government’s commitment to strict budgetary cuts and the desire of the Central Bank to soften its monetary policy stance. Where citizens will have the opportunity to spend more and where the company will find funds to increase investment, it is not very clear. This can be explained is that the expectation of easing or lifting sanctions that, in theory, will entail the inflow of investments into the country and in the public sector in particular. But while serious signals about the possibility of lifting the restrictions were reported.
The recovery in consumer demand will help the economy grow
Photo: Sergei Fadeichev / TASS
At the Centre of development also noted the prospect of the erosion of social spending (public-sector employees in the next few years will lose up to 22-30% of available resources), which would entail a further reduction in consumption. According to experts, state and regulatory level there are only two options: to raise taxes or to mitigate the monetary or even fiscal policy (the report is bluntly called emission financing of budget deficit). The first faces great difficulties, and second, although it may give a boost to development in the short term, in the future will have inevitable inflation.
By the way, the question about inflation has caused discrepancies between the Ministry of economic development and Ministry of Finance. In the published portion of the forecast of the Ministry Alexei Ulyukaev assumed high rates of growth of prices. Only by 2019 inflation will slow to 5 percent, before that it will decrease very slowly. While the Finance Ministry believes that the target of 4 percent, which is eyed by the government and the Central Bank in the formulation of financial policies, attainable as early as 2017.
Correspondence from this discussion it can be concluded that the Ministry is looking quite liberal on the issue and high public spending. Inflation is marked on the significance of the second place. The main goal is to return to growth. The Finance Ministry believes that this will not work, and requires to strictly follow the plans to curb inflation. If you win point of view of the Ministry Anton Siluanov, the Ministry of economic development drawn prospects are unlikely to become reality.
For now, we see that at approximately the same expectations of prices for hydrocarbons the difference in the predictions has been more than substantial. Perhaps the Ministry of economic development economists see “green shoots” where the expert community does not notice them. Or wishful thinking. In any case, highly unstable contemporary situation may negate any expectations, whether positive, negative, in the blink of an eye. As has already happened in 2014.
