The New York Times (USA): pessimistic forecasts in Russia slows down investment and the economy

Moscow — last year, Russia has set a target to accelerate growth and to establish a pace that will be above the world average. She saw a way to gain a foothold on the positions of the dominant world powers.

But the beginning of the implementation of this plan was unconvincing.

a Proposal by President Vladimir Putin, many economists seemed to return to the command economy of the Soviet period. It provides for state expenditure in a number of specific areas for the next six years in the amount of $ 400 billion. The list includes 900 pianos for music schools and 40 indoor rinks, as well as funds for roads and airports.

But this month, the government reported that the Russian GDP in 2019 increased by only 1.3%, while in the previous year the growth amounted to 2.5%. They blamed the bureaucrats who have been slow to expenditure of funds.

unlike Russia, the world’s average growth last year was equal to 2.9 percent, as reported by the international monetary Fund. Now the goal is to provide growth above the world average next year seems unattainable.

six years have Passed since then, as part of Western sanctions on Russia had limited access to the banks of the West, and the price of oil, which is an important article of Russian export, dropped to a historic low. Current growth rates indicate that the Russian economy is moving forward at a snail’s pace, bumping on to obstacles such as low levels of private investment and giving the failures of the state bureaucracy, which dominates in the main Russian industries.The context ofMinister of industry and trade of Russia Denis Manturov at the international exhibition of commercial avtotransport 2019 Comtrans in Moscowtrade Minister: Russia will become one of the five largest economies in the world (Handelsblatt)Handelsblatt19.02.2020 BNE Intellinews Russia — a safe haven for инвесторовbne IntelliNews18.02.2020

But for many other standards, the economy seems quite healthy and robust. The government boasts of large foreign exchange reserves, progress in the fight against inflation (now its annual growth rate is 2.4%) and budget surplus last year, which amounted to 500 billion rubles, or eight billion dollars.

But paradoxically, many economists see the problem just in the budget surplus and huge foreign exchange reserves, which at the end of last month reached 562 billion. The state’s reluctance to spend money on economic stimulus delivers a definite signal to the private sector.

“Nobody wants to invest money, — says the founder and Director of the Moscow analytical Center for post-industrial studies Vladislav Inozemtsev. — No one believes that tomorrow’s economic situation will be better than today.” Inozemtsev calls this period the “lost decade” for Russia.

the Government continues to replenish the supply of savings, although last year came the promise of fiscal stimulus, and Putin reiterated their this year, outlining the plan for new spending on such items as free meals in schools.

This policy is a reflection of deep-seated Russian belief that however bad today was, tomorrow may be even worse. Grow the tax payments as insurance against future shocks, such as more unpleasanttkie sanctions and falling oil prices.

the Government and state-owned company (the state owns a controlling stake in six of the 10 largest Russian companies of the exchange) do not spend money in the hope that the economy and tax base will grow by themselves.

as the reason for the uncertain growth economists also say low investment in the private sector. Investors fear that the future of the economy and world prices for raw materials will be worse than the present.

an Outbreak of coronavirus in China also has a negative impact on the Russian economy, although the country is largely immune from the problems of the global industrial chain, because the manufacturing sector it is negligible. In Russia, there were two registered cases of infection with coronavirus.

actually, the main threat to Russia is connected with the drop in oil prices. In recent weeks the exchange rate of the ruble decreased, that attributed to the increase in diseases in China.Related articlesthe Objects of the production Association "Tatneft" in TatarstanJavan: two oil giants of the world converged in схваткеJavan17.02.2020 NZZ: the Russian Ministry of Finance buys СбербанкNeue Zürcher Zeitung13.02.2020

the Faltering economy does not fit the political image of Russia both inside the country and abroad, where it represents a world power in good health. Geographically, the country increased after the annexation of Crimea in 2014. It interferes in elections, military intervention in Syria and Ukraine. But the Federal budget of Russia remains essentially unchanged since 2014, when you consider the adjustment for inflation.

Revenues from oil sales go into the state Treasury, or in the so-called national welfare Fund. This huge bill in the winter its target of seven percent of GDP, amounting to $ 125 billion.

to increase these reserves, the government regularly is the budget revenues based on artificially depressed price projections for oil, and the money saved not spent, and lays. Now in the budgeted price below $ 50 per barrel, although the price of benchmark Brent hovered at 60 dollars.

“They were afraid and are afraid of any external shocks, be it a trade war, the decline in oil prices or sanctions,” — said the chief economist of the “BCS global markets” (BCS Global Markets) Vladimir Tikhomirov.

And since there is such a rule, even short periods of increasing oil prices in recent years has not helped to stimulate the growth. Each additional dollar per barrel gives the Russian Treasury about two billion dollars in tax revenues. But all these money becomes a new layer of cotton wool in the Kremlin the airbag that is supposed to protect the country against a possible future downturn.

“Of a dynamic, rapidly growing country with high inflation Russia is becoming a place more similar to Eastern Europe”, — said the chief economist of the Russian branch of “Bank of America” Vladimir osakovskiy.

Private investors are reluctant to invest in the Russian economy, but more willing to send them to other places. After the collapse of the Soviet Union from Russia annually take tens of billions of dollars. The result is that the money derived from it more than transformed into domestic investment. The Russians, like their government, are trying to hedge against economic downturns, putting the money into a dollar account, spending it on foreign real estate and investments abroad.

last year, the Russians withdrew from the country $ 26 billion. “The private sector is a large demand for foreign assets,” said chief economist of investment company “Renaissance Capital” in Russia Sophia Donets, had previously worked in the Central Bank.The context ofMinister of industry and trade of Russia Denis Manturov at the international exhibition of commercial vehicles Comtrans in Moscow 2019trade Minister: Russia will become one of the five largest economies in the world (Handelsblatt)Handelsblatt19.02.2020 BNE Intellinews Russia — a safe haven for инвесторовbne IntelliNews18.02.2020

But in this economy there is a bright stripe. Long years of fierce inflation was the Bane of post-Soviet Russia’s economy, but low growth and a decrease in real wages (adjusted for inflation) helped to bring rising prices under control. As a result, in Russia “became less risk, lower inflation and growth also was lower,” said Osakovsky. In the years of the economic boom that occurred in the first two presidential terms of Putin (2000-2008), the growth rate of the economy averaged seven percent annually.

a lack of investment in the private sector gave some short-term advantages to investors. Instead to invest profits in the business, the giant steel and oil Russian company repay their debts, and recently began to pay big dividends, and that has led to the growth of their quotations. The Russian securities market according to their performance in the last year took second place in the world, because there is a price increase in us dollar terms was 40%.

Investors also heartened by the prospect of corporate profits, because the cost of borrowing due to lower inflation also goes down. Last year, the Central Bank five times to cut interest rates. Now the benchmark rate is six percent.

officials point out that new rules to combat bribery in bureaucracy has led to a slowdown in the use of public funds allocated under the stimulus plan, which was announced last year. They say that the money will go this year. Indeed, January saw an increase in expenses.

the Russian economy, the volume of which in monetary terms amounts to 1.7 trillion dollars, ranks eleventh in the world between Canada and South Korea. It is by the standards of GDP, which is the most common indicator of economic activity in the country.

According to Donets, the policy of accumulation of reserves in terms of geopolitical tensions and sanctions increases, however, the government may press a lever for a higher gear.

“the focus was on the sustainability of public finances, and this attention will continue for the foreseeable future, she said. Six years of fiscal and monetary policy was very strict.”

however, she notes that previously, the Kremlin allowed a more generous spending. Donets indicates that public spending on construction of stadiums, roads and Railways in front of the winter 2014 Olympics and before the world Cup held in 2018.

Since Russia in 2014 was to pursue a more aggressive foreign policy, the average growth rate of the economy are 0.7% per year, including two years of recession. Most economists thwe say that because Russia an educated population and large reserves of resources, the economy can grow faster.

“One thing is certain — said Donets. — The Russian economy has not so much potential growth.”

the new York times contain estimates of the solely foreign media and do not reflect the views of the editorial Board of the new York times.