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The Russian economy casts doubt on Putin’s bet on “breakthrough”

Экономика России ставит под сомнение ставку Путина на "прорыв"

May 7, the day of inauguration of the President, Vladimir Putin signed a new “may decree”. The basic purpose of it called a noticeable improvement in the standard of living of the population — by 2024, the level of poverty should be reduced by half.

In the document “On national goals and strategic objectives development of the Russian Federation for the period up to 2024,” also said that in six years should be ensured the steady growth of real incomes and the rising level of pensions above the rate of inflation.

In other words, the head of state gave to understand that to live in the next few years will be better. And everything seems to be right and good. But the question arises: what made the first “may decrees”? They recall, Putin signed the same day six years ago, and they were also expected to significantly improve the lives of Russians. However, not by 2024, and by 2018-mu.

As acknowledged by Putin himself at a meeting late in the evening of may 6 in the Kremlin — the day before the resignation of the Cabinet and his inauguration — the government has made “exactly the point” of all indicators, which were laid in the first “may decrees”.

And that’s an understatement. So, in the first decrees of the task was to increase by 2018, real wages in 1.5 times. In fact, due to the introduction in 2014 of Western sanctions and falling oil prices, Russia’s population began to Peter out. In three years, according to estimates from Rosstat, the wallets of citizens of the Russian Federation was devastated by 11%. In terms of money people have lost 4.9 trillion rubles — so reduced their purchasing power.

According to estimates of experts of the Ranepa, in the regions the picture is even more grim: in the Samara region, the collapse of incomes of the population for 4 years has reached 30% (almost three times more than the average decline), the Chelyabinsk, Kemerovo region and Tuva Republic, Perm Krai, Magadan oblast and the Komi Republic amounted to 20% or more.

Yes, on 4 may, the government cheerfully has reported that at first “the may decrees” “completed and removed from control 165 orders and 91.7% of the number of instructions that need to be executed to the present time.” But in practice the budget of the Russian Federation has been enriched largely due to the devaluation of the ruble. Suffice it to recall that on 31 December 2013 the official dollar rate in Russia amounted to 32,72 RUB, and already 2014, the year ended with the index 56,23 rubles per dollar. Due to the depreciation of the national currency was the increase of salaries to state employees, and the implementation of social programs.

In the end it turned out that the first “may decrees” is fulfilled only on paper. Yes, Crimea is ours, and the power of our Armed forces, demonstrated in Syria — it is excellent. But for bread, these achievements do not smear.

And now the government all the same Medvedev tasked with implementing the “may decrees 2.0”. Note, in December 2013, who was then Deputy Minister of economic development Andrei Klepach noted that to fully implement the first of the “may decrees” require annual economic growth of 7% of GDP. A new decree is even more ambitious, and the economy barely worked up to 1.5% of GDP. So I want to ask: what will save the “may decrees 2.0”? Another devaluation of the ruble, or an unprecedented rise in oil prices?

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— The objectives of the new “may decree” were not unexpected — they were formulated by Putin during his address to the Federal Assembly — the head of a direction “Finance and Economics” Institute of contemporary development Nikita Maslennikov. — Another thing, we do see a conflict between stated goals and available resources.

Ambitious goals are clear. It aims to keep Russia’s position in the world. If the rate of growth of the Russian economy will be below 3.5% of GDP per year, our share of the world economy will inevitably shrink. Anything good does not promise it to us.

In fact, the situation is well described by the quote from “Alice in Wonderland”: “you Have to run just to stay in the same place, and in order to get somewhere else, you need to run twice as fast”.

“SP”: — as soon As our economy can reach the growth rate?

— In 2018, growth is likely to be very weak. We can then start to slowly accelerate. At around 3.5% of GDP — at best, subject to reform — we can only go out to 2020. If the new government will leave the economy in its current form, Russia, I believe, is doomed in the next six years to stay in the “ghetto” two-percent growth.

That is not enough, not only to hold our position in the world, but also to guarantee the fulfillment of social obligations, which are reflected in the new “may decree”.

Judge for yourself. What about the rising level of pensions, as prescribed in the decree of Putin, could be involved, if the replacement rate we have (the ratio of average pensions to average wage) shows a steady downward trend? This ratio is still not out on recommended by the International labour organization the level of 40%, although the talk about going with the so-called indexation of pensions in 2010.

The transfer to the pension Fund from the Federal budget for the next three years remains at $ 2 trillion. roubles a year, and the Pension Fund covers insurance premiums the cost of insurance pensions by up to 2/3.

Even to just to plug the hole in the Pension Fund, we need serious economic growth. And hinder our economy to grow structural constraints.

Recall, according to the adverse scenario to the 2035-2040 year, Russia’s population may shrink to 129 million. As to the reduction of the working population, in 2018, we are faced with a situation when for a number of professions there is a shortage in the labour market.

Prevents the growth of unfavorable investment climate, lack of competition, the commodity structure of exports. I should add that the share of government in the economy, according to the most modest estimates, about 50% of GDP. One is talking about a totally insufficient level of development of small and medium-sized businesses.

All these issues need to be addressed, if the government Medvedev is going to perform the new “may decree”.

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“SP”: — why the Cabinet would be a logical place to start?

— With the formation of a clear and structured agenda in economic policy. Plus, with the fiscal consolidation to improve the efficiency of government spending.

Revealing investigation by the state office of public Prosecutor a situation with the Ministry of agriculture: in 2017, the Agency was allocated for concessional lending to farmers about 25 billion rubles, of which purposefully spent only a quarter of the funds — the rest is “frozen”. This indicates the extreme inefficiency of the current government.

The government needs to reduce the pressure of security forces on the business, clearly explain what will happen with the tax system. Otherwise, the business will continue to behave like this: try to grasp a little here, a little there, if anything you can sell on the market to sell without hesitation, and raising prices to the skies, because the demand is low.

New “may decree”, notice the current economic uncertainty to dissipate slightly. It sets the direction in which Russia needs to move but does not answer the question, how to do it. And if the government Medvedev leave everything as it is, “breakthroughs in all spheres of life”, the necessity of which talked in his inaugural address, Mr Putin, may not happen.

— When in April Dmitry Medvedev reported to the state Duma on the results of a six-year work of the government, he gave no comparative figures, — said Chairman of Russian economic society. SF Sharapova, Professor of international Finance (University) Valentin Katasonov. He called this time “the years of tests, testing the strength of our economy” that got a lot of “strong blows”: the financial crisis, the collapse of commodity markets, the sanctions, said that “we not only survived, we have begun to develop.” But not a word is said, what metrics were put in the first “may decrees”, and how they are in reality achieved.

For me, it was amazing. Even in the most stagnant years of the Soviet Union was going to the Plenum of the Central Committee and held the congresses of the Communist party, on which the General Secretary of the CPSU, be sure to read the report. In this document, always had a table in which there have been clear indicators — planned and actual.

A number of indicators have been underperformance, and sometimes even failures. But the people had a clear idea of where it is going, the country’s economy.

In contrast, in a verbal mess, which dumped Medvedev to deputies, to understand at all desire is impossible. But I fully admit that the colleagues of the Prime Minister in the government talk about the same. Because they all, in my opinion, live in a second reality — there is a concept in social psychology.

These people, I believe, do not economy. Economy — always creative construction. But in our country we are witnessing the opposite process — our common home economic block of the government dismantle brick by brick, and in it explains what sweat does to the economy.

That’s why I don’t expect anything good neither from the new “may decree” no remapping Medvedev for Prime Minister.

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