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Russia will face another three years of crisis

The Ministry of economic development lays in the forecast until 2019, the freezing of public sector wages and pension, the indexation of pensions by 4%

Россию ждет еще три года кризиса

The Ministry of economic development has determined basic prerequisites for socio-economic development of Russia (there is a “Sheets”) for 2016 2017-2019, and the Official forecast for 2016-2018, already outdated, and by April the Agency must submit to the government a new document.

The price of oil is the main condition for the preparation and forecast, and budget all four years will remain under $50/bbl., the Ministry suggests. In the base case average price in 2016 is $35/bbl., in the next three years – $40, $45 and $45/bbl. respectively. In a conservative embodiment, oil is cheaper than the base $10. Optimistic (target) option is the same as basic.

This is not a forecast, but just some terms for discussion, said a Federal official. The Finance Ministry has already calculated the budget and $25, and $30, and $40/bbl., says another Federal official. However, at $35/bbl. not yet thought, he knows.

“Basic hypotheses predict” retain for all four years of the current external environment and adopted at the 2016 decisions in fiscal policy. The Ministry of economic development involves the growth of the global economy by developed countries; the preservation of sanctions against Russia and retaliatory retaliatory sanctions until the beginning of 2020 Limited access to capital markets and will reduce the outflow of capital – from $35 billion in 2016 to $15 billion in 2019, expects the Ministry.

The budget continues the savings on social costs. Pensions in 2016 will be indexed once a year on the inflation target to 4%. However, the Ministry expects that this goal will not be met neither in 2017, as expected by the Central Bank nor even in 2019: by the end of this year it will be reduced to 7.7%, and the year after to 6.2% by the end of 2018 to 5.5% and remain at this level by the end of 2019 This means in real terms for 2016-2019 pension will be reduced by about 10%.

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Benchmark “wage decrees” of the President to serve will be reduced by 12% the size of the average economy wage benchmark has been updated with the addition of the state statistics in the calculation of the average wages income from informal employment in the informal sector earnings are lower. Thus, the value of salaries of teachers, doctors, professors and other categories of public sector employees, which by decree of the President rapidly increased wages, would depend on the situation on the labour market. The Ministry of economic development comes only from the fact that the nominal wages of these categories of workers will not decline.

The indexation of the salaries of other state employees, including civil servants, are also frozen until the end of 2019 with an annual reduction by 5%.

Similarly, for all four years will be authorized and funded part of the pension.

Budget investments in human capital – expenditure on health, education, culture will be maintained in relation to GDP at the current level, involves the Ministry of economic development. This means that in real terms they will decline. The forecast for GDP growth in this document the Ministry of economic development no, but the projected price of oil, Russia’s economy will continue to decline for at least another year: in the January version of the economic development Ministry forecast in 2016 was expected to decline by 0.8% with oil at $40/bbl.

The spokesman called the document “draft for discussion”: “This is not a forecast, but first estimations”. Most likely in the final oil price will be above – trend at $40/bbl., he recalled the words of the Minister Alexei Ulyukayev.

Now the Ministry of economic development must receive feedback from other ministries and agencies, including the proposed terms, and to reduce the overall prognosis, says a Federal official.

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With the proposed agree is clearly not all: the government has pledged to index pensions on actual inflation, not the target, like an official government office. No decision on the extension of the 4% indexing is not something that is not – on the contrary, the second indexing is discussed in 2016, Indexation on inflation target during the forecast period will lead to falling living standards of pensioners, will not benefit the economy, he points out.

The representative of the social Deputy Prime Minister Olga Golodets refused to comment on the calculations of the Ministry of economic development.

There is nothing more permanent than temporary solutions, says the Director of the regional program of Independent Institute for social policy Natalia Zubarevich. There were no illusions that the freezing of the cumulative part will be canceled, she says. In order not to lose face because of the inability to perform presidential decrees, was invented methodical maneuver: since it is impossible to raise – lower the bar. But the downsizing of the public sector, on the contrary, most likely, unrealizable, said Zubarevich, especially in the period before the presidential election: “‘ll Make it easy, will rent allowances, bonus payments. They will save the old fashioned way – decrease the salary”.

Such a hard time with predicting the recession will continue or at best, growth will be close to zero, said Vladimir Tikhomirov from the BCS. But the Ministry of economic development just extrapolates the current situation, trying to make such forecasts, the answer to the question, what future awaits us, not worth it, he said: “This macroeconomic exercise is to see how the situation will develop in such introductory. I doubt that reality will be one.”

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