Jul-2018

References \ 2018 \ Jul-2018

Regional Budgets in Q1 2018

Alexander Deryugin – Senior Research fellow of the Budget Policy Department, Institute for Applied Economic Studies, Russian Presidential Academy of National Economy and Public Administration; Research fellow of the Budget Policy Department of the Gaidar Institute. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Q1 2018 saw relatively high growth rates in regions’ revenues and expenditures. Regions with lowest revenues posted relatively slow growth rates in revenues for two straight years, thereby mounting their debt burden and reflecting further differentiation in the development of Russia’s territories.

Key words: regional budgets, regional budget revenues, regional budget expenditures, regions’ public debt, public budget loans and bank loans.

Corporate Borrowings in 2017 and Q1 2018: the Bond Market Keeps Growing

Michael Khromov – Head of Department for Financial Studies of the Gaidar Institute; Senior Research fellow of the Center of Structural Research, Institute for Applied Economic Studies, Russian Presidential Academy of National Economy and Public Administration. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Elizaveta Khudko – Senior Research fellow of the Budget Policy Department of the Gaidar Institute; Senior Research fellow of the Budget Policy Department, Institute for Applied Economic Studies, Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Early in 2018, growth rates of bank lending to non-financial institutions are gradually growing. The market of domestic bonded loans is building up its positions in the total funding of the real sector of the Russian economy. Issuers from the oil and gas sector occupy the leading position there.

Key words: Russian banking sector, corporate lending, financial restructuring of banks.

Public Social Feelings Prior to and after the Presidential Elections

Elena Avraamova – Head of Social Development Department, Institute of Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration, Doctor of Economic Sciences, Professor. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Dmitry Loginov – Senior Research fellow of the Social Development Department, Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Common perception of the stabilization of economic situation without any signs of its improvement dominated prior to the presidential elections. Social optimism has significantly grown during the elections. Expectations of the positive development have slightly diminished during one month following the elections.

Key words: households’ social wellbeing, social optimism, social pessimism, personal economic risks and presidential elections.

Survey of Current Business (April-July 2018)

Sergey Aukutsionek – Head of Center for Transition Economy Studies, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, Candidate of Economic Sciences. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Andrey Yegorov – Research fellow of the Center for Transition Economy Studies, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, Candidate of Economic Sciences. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Inessa Bachirova – Senior Research fellow of the Center for Transition Economy Studies, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Tatyana Serzhantova – Senior Research fellow of the Center for Transition Economy Studies, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

In April 2018, due to a noticeable increase in the share of enterprises reporting a decline in output prices, the diffusion index of output prices markedly dropped (-17 points), reaching the minimum for the entire history of REB’s observations since 1991 – 37, which is 2 points less than the previous minimum value, fixed in December 2008. The value of the index of expected in 3 months changes of output prices also significantly decreased (-16 points); It was smaller only once – in the third quarter of 1998.

The capacity utilization rate decreased significantly, there was a noticeable reduction in stocks of finished products (relative to the normal level) and of the share of financially sound enterprises.

Key words: industry, industrial enterprises, price level, wages, employment, output, investment, indebtedness to banks, order-book level, stocks of finished products, capacity utilization rate, risk of bankruptcy, economic policy, crisis duration.

Socio-Economic Dynamics and Demography of Regions

Natalia Zubarevich – Main Research fellow of the Demography and Migration Research Department, Institute of Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration, Doctor of Geographic Sciences, Professor. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Nikita Mkrtchyan – Leading Research fellow of the Demography and Migration Research Department, Institute of Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration, Candidate of Geographic Sciences. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Еkaterina Tretyakova – Research fellow of the Demography and Migration Research Department, Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

In January-April 2018, the main factor that affected the budgetary sphere were the federal elections, which resulted in a significant growth of regional budgets income thanks to PIT and transfers as well as accelerated growth of social expenditure primarily on health care and social safety net. Regional socio-economic development dynamics demonstrate growing polarization regarding investment, housing construction, retail trade turnover, small business employment, and the state of the labor market.

For the first four months of 2018, natural population loss in Russia has increased. This situation was explained by both a continuing decrease of new births (4.3$ less against the same period 2017) and growth of mortality rate by 1%.

In Q1 2018, migration inflow continued contracting and barely half compensated the mortality. The main reason is the pre-crisis level of migration from the Ukraine. Regional properties of the population loss have not been changed significantly.

Key words: regional analysis, budgetary expenditure, birth rate, mortality, migration, social indicators.

Industrial Enterprises in Q2 2018

Sergey Tsukhlo – Head of Business Surveys Department of the Gaidar Institute, Candidate of Economic Sciences. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

In Q2 2018, the situation in Russian industry did not undergo any significant changes. Most of Russian enterprises continued to register persistently low demand, which enabled them to confidently control their finished product stocks and maintain their output growth rate at minimum. In Q2 2018, growth in selling prices hit its three-year high, although it should be said that in June prices experienced a sharp drop sufficient to roll back all their growth achieved in March, April and May. The investment plans of industrial enterprises have remained at their local maximum since February 2018.

Key words. Russian industry, demand, output, employment, stocks of finished goods, crediting of manufacturing, actual trends and expectations.

Review of the Current Social Indicators

Elena Е. Grishina – Head of Department of Labor Markets and Pension System Research, Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Marina Eliseeva – Research fellow of the Social Development Department, Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Yulia Chumakova – Deputy Director of Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The consumer price index in May 2018 against May 2017 came to 102.4%. Prices of food products have practically remain unchanged (100.4%) and inflation dos due to price growth on non-food products (103.4%) and services (104%). In April 2018, the growth of real disposable cash income of households, real accrued wages, and real accrued pensions constituted 5,7%, 7.8%, and 0.8%, respectively.

Wages seen in Q1 2018 were above the level observed in Q1 2014 and finally exceeded the pre-crisis level. The share of poor people recorded in 2017 has come to 13.2% and together with the shortage of cash income has somewhat decreased against 2015–2016. Decrease of the poverty line in the backdrop of declining real cash income became possible owing to the fact that the minimum wage was lagging behind the inflation growth.

Uncertainty in the future and in assessment of economic growth prospects correlate with the growth of negative expectations, first of all, among the employed people who are afraid of a potential job loss, wages cut and back pay.

Key words: labor market, wages, consumer prices, retail trade, cash income of households, poverty line, social sentiment.

Economic Troubles of Argentina: New Problems or Errors of the Past?

Anna Kiyutsevskaya – Research fellow of the Monetary Policy Department of the Gaidar Institute; Senior Research fellow of the Center for the Study of Central Banks, Institute for Applied Economic Studies, Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Pavel Trunin – Head of Center for Macroeconomics and Finance of the Gaidar Institute; Leading Research fellow of the Center for the Study of Central Banks, Institute for Applied Economic Studies, Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The toughening, by the central banks of developed countries, of their monetary policies has triggered a capital outflow from the developing countries. To control the inflation caused by a significantly weakened national currency, the central bank of Argentina had to sharply toughen its monetary policy.

Key words: Argentina, Central Bank of Argentina, foreign-exchange crisis, monetary policy and rate of inflation.

VAT Increase from 18% to 20%: Macroeconomic Effects

Andrey Polbin – Head of Mathematical Modeling of Economic Processes Department, Institute for Applied Economic Studies, Russian Presidential Academy of National Economy and Public Administration; Head of Macroeconomic Modeling Department of the Gaidar Institute, Candidate of Economic Sciences. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The government proposes to increase VAT from 18% to 20% from January 2019. Main objective is to fund the budget as stated in the May Presidential Decree. According to our calculations, the rate increase will lead to a decrease in GDP, consumption, investments, exports and imports compared to the theoretical economic scenario which envisages no changes in fiscal policy. Still, VAT increase, compared to other possible ways of funding the planned rise in state spending, is an adequate measure of economic policy.

Key words: value-added tax, VAT upward adjustment, macroeconomic situation, President’s May Decrees.

Trade Facilitation Between EAEU the and China within the Framework of the Agreement on Trade and Economic Cooperation

Timur Aliev – Senior Research fellow of the Russian APEC Study Center, Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Tatyana Flegontova – Director of Russian APEC Study Center, Russian Presidential Academy of National Economy and Public Administration. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The agreement on trade and economic cooperation between EAEU and China signed in May has a non – preferential nature. Due to the fact that a number of EAEU members are not prepared yet to liberalize their markets for Chinese goods and investments, the development of a fully-fledged free trade zone between them seems to be unlikely so far. Nevertheless, the signed agreement could promote an increase in efficiency of mutual cooperation between EAEU and China, facilitate, for example, trade procedures and transparency.

Key words: Eurasian Economic Union, People’s Republic of China, Agreement on trade and economic cooperation between the EAEU and China.

Best Time to Complete Tax Manoeuvre in Russia’s Oil Industry

Andrey Kaukin – Head of Department for System Analysis of Sectoral Markets, Institute of Industry and Markets Infrastructures, Russian Presidential Academy of National Economy and Public Administration; Head of Sectoral Markets and Infrastructure Department of the Gaidar Institute, Candidate of Economic Sciences. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Eugenia Miller – Research fellow of the Department for System Analysis of Sectoral Markets, Institute for Applied Economic Studies, Russian Presidential Academy of National Economy and Public Administration. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Some positive results have been achieved since a tax reform was kicked off in the Russian oil sector late in 2014. The 2014–2017 period saw an increase in the average depth of oil refining in Russia. Despite ongoing disputes, now is a good time to complete the so-called “tax manoeuvre” and to create effective incentives for Russian oil refineries to enhance their operative efficiency. The key risk here lies in specific parameters of the reform, particularly in the amount, period and distribution mechanism of oil refineries subsidization.

Key words: oil industry, tax maneuver, severance tax, export duties.

Foreign Direct Investments in the Russian Federation in 2017

Yury Zaitsev – Senior Research fellow of the Foreign Trade Department, Institute for Applied Economic Studies, Russian Presidential Academy of National Economy and Public Administration; Senior Research fellow of the Institute of International Economics and Finance, Russian Foreign Trade Academy, Candidate of Economic Sciences. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

An increase in the incoming foreign direct investments (FDI) in the Russian Federation in 2016 and the first three quarters of 2017 gave way to a decrease in the capital inflow in Q4 2017. This reflects change for the worse in foreign investors’ sentiments due to negative expectations of new sanctions to be introduced by the US, as well as a drop in demand on Russian state bonds.

Key words: foreign direct investments, incoming foreign direct investments, outgoing foreign direct investments and anti-Russian sanctions.

Dynamics of the Russian Segment of E-Commerce and E-Payments

Aleksandra Polyakova – Leading Research fellow of the Living and Social Protection Research Department, Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration, Doctor of Economic Sciences, Professor. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The development of e-commerce which is growing in Russia at a high rate modifies the model of consumption and leads to a reduction of the buyer’s transaction costs owing to a less amount of time spent on purchasing of goods and price cuts.

Key words: e-commerce, e-payments, online sales, offline sales and bank card.

On Methods for Constructing Confidence Sets for the Break Dates

Anton Skrobotov – Research fellow of the Mathematical Modeling of Economic Processes Department, Institute for Applied Economic Studies, Russian Presidential Academy of National Economy and Public Administration. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The paper reviews the methods of construction of confidence sets for the break dates in time series. The paper consider both the tests based on limiting distribution of break fraction and based on inverting of the test statistic for the break date. The considered methods are applied to the Russian GDP.

Key words: structural breaks, confidence sets, Russian GDP.

Proportionality Issues on the Regulation of the Institutions Relevant to Financial Inclusion

Yury Kondrashin – Research fellow of the Department for Financial Studies of the Gaidar institute. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Issues on regulation and supervision of the microfinance market is vital for financial inclusion thus for the socio-economic growth. Nevertheless choice of the right policy is a tricky question and proportionality concept is a way to find balance between stability and development.

Deep knowledge and comprehension of the international standards and principles relevant to proportional creditors’ regulation is obligatory to find correct policy solutions. There are summary issues in the article on international materials, expert opinions and authors’ advice on standard setting bodies’ principles implementation into national legislation. In this regard policy makers, market experts and participants may find in the paper answers on the questions relevant to the proportionality concept.

Key words: microfinance institutions, proportionate regulation, prudential supervision, financial system, international standards.