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Tuesday, March 13, 2018

The presidential economic Council expect of a clash of ideologies

May 25 will be a meeting of the presidential economic Council. Last time, few people remember that he met in 2013. Now there are expectations greater impact on its work. The aim is to pave the road to achieve the 4% economic growth. But there are other expectations. The Council may a sharp collision not only different expert positions, but ideologies embodied in opposing the proposals for the development of the economy.

Suffice it to say that already declared the reports of the Stolypin club, and CSR, which will hear the Council. And they offer a fundamentally different economic development parameters.

photo: Mikhail Kovalev

“In the red corner…”

The CSR report is not yet submitted, but now the center is headed by Alexei Kudrin, economic views which are well known.

But presidential adviser Sergei Glazyev to 25 may ready for a long time — his views are also a secret for anyone are not, and that he is co-author of the report. In addition, the report of academician Glazyev (without smoothing the most rough edges, especially in the geopolitical part, co-authorship, which refers waged by the US against Russia’s “hybrid war”) was already discussed at the security Council.

A member of the presidential economic Council is, in particular, Elvira Nabiullina, it will hear proposals for amendments to the Constitution and the constitutional law on the Central Bank. Goal is to deprive the Bank of Russia is its current independence and become a tool of monetary financing of the economy. I do not think that these proposals will be met with Nabiullina and the Council as a whole with enthusiasm.

The “investment model”

It is the preparation of the Board meetings along of course, with the budget process pushed the Ministry of economic development to the manufacture not just another forecast for 2016 and the years 2017-2019, and the version of the forecast plan. The long-awaited prediction, which is not just with the calm of the fatalist says that when such average price of a barrel of oil GDP will behave, and in the other that way. This time the forecast is not the manipulation of oil prices, from which the authors have radically declined, and the call for the “investment model”, that is, to make the source of growth is investment.

It would seem a platitude, but before the crisis the main driver of economic growth in Russia was considered to be consumer demand, not investment. Now the Ministry of economic development of the horse varies among drivers. The reason for this is obvious. Consumer demand suffers losses due to the fall in real incomes, and here came the Russian corporate sector, there is what regularly reports Rosstat.

Profit improvement in the conditions of crisis it seems a mystery. But their source is exports, the profitability of which provided considerably devalued the ruble. There is convincing any skeptic example: the financial report of Gazprom for 2015 showed a fivefold (!) the increase in net profit. However, the export price of gas has fallen sharply and continues to fall in the first quarter of 2016 is already in annual terms, it fell by an impressive 50.2 per cent. And again, no mystery there: the dollar fell the price, and increased net profit in RUR. Thanks to a floating exchange rate.

Still everything is quite clear. But then there is the Central problem. Profits in the corporate sector grow in 2015 and 2016, but investments they are not fundamentally transformed. Investments in contrast to the net profit did not grow, but rather declined. On the question of what should be done to change this situation, the Ministry of economic development gives no answer.

More precisely, the answer is not given on the Ministry of economic development proposes to maximize the sources, we emphasize the potential for investment. Of course, we are talking about the direct growth of public investment from the national welfare Fund and budget in the “strategic and efficient investment projects”. Even here there are some compromises with the proposals to extend project financing for revival of the investment process.

But the main bet in the “investment model” of economic development is on the growth of profits of the corporate sector, including by limiting the growth (and not freezing, as reported by several media outlets) of nominal wages in the economy in 2016-2017.

Nonetheless 2017 has reason to celebrate the centenary of the 1917 revolution. It is proposed the reduction in real (inflation-adjusted) disposable income (2.8% in 2016 and 0.3% in 2017 m).

The reduction in real pensions should be even more stringent: 4.8% in 2016 and 2% in 2017 m with a further indexing only to inflation until 2019. It is clear that the result will increase the number of people living below the poverty line — from 13.1% in 2015 to 13.7% at the end of 2017, with a peak in 2018 at the level of 13.9%.

Social risky maneuver should lead to increased profitability of Russian companies. Staying in 2017 at the same level that in 2015 m, in an election year they should grow (without devaluation effects) by 12%, and in 2019 — by 10.8%. As a result, the Ministry of economic development expects the investment to grow rapidly, the pace of growth will increase from 3.8% in 2017 to 7.1% in 2019, when they need to reach 24.1% of GDP.

If you go back to the Central question: why a profit will turn into investment if it still does not do this, then the answer is the Ministry of economic development is this: take a number! It is in the spirit of the Russian historical traditions.

Any politically accented reforms, Ministry of economic development does not offer. For it is, however, obvious reasons. We need political solutions, which lies outside the jurisdiction of not only economic development, but also the government as a whole, without which neither an independent judiciary is not strengthened, nor excessive activity of law enforcement agencies together with security services in the economy not to limit it. Namely these political components of the Russian business climate in the first place hinder the conversion of profits into investments. So the question of conversion of profits into investments by and large remains open. The Ministry of economic development relies not so much on these political measures, much on the increase in profits and that the crisis needs to end once.

Three forecast

Social maneuver, proposed by the Ministry of economic development and consisting in limiting the growth of salaries in current and future years with further compensation, to encourage the growth of profits and investments, which should be the main driver of economic growth, predictably provoked a strong reaction. With sharp criticism by a well-known economist and a principled opponent of the “liberal course” Mikhail Delyagin.

His logic is this: limit the growth of incomes of the population — this is a robbery. Due to this measure it is possible to achieve earnings growth, but not investment. To invest “in the robbery” no one is going, the profits will be used not for investment purposes, at least not in Russia.

Maxim Vasin, chief economist, head of the methodological Department of the National rating Agency, criticizes the “investment model” of economic development from the other side. He believes that the proposed limitations on the level of indexation of budget expenditures for the payment of salaries and pensions “in any case, cannot lead to economic growth, but only will make the budget more balanced”.

He stresses: “the Policy in any of the developed countries of the world are not ready to announce to their voters that the growth of the corporate sector in their country will occur through the reduction of real incomes of voters. The political consequences of such steps will negatively expressed at the time of the next election”.

Note, incidentally, that the forecast of Ministry of economic development, when it comes to the global economy, a driver, for example, the U.S. economy is called consumer demand. Meanwhile, Russia is entering a big election cycle, and it is unlikely the presidential economic Council will make a choice in favor of the above options, offer economic development.

But it’s time to reveal the cards: the Ministry of economic development, as usual, three versions of the forecast. Basic, conservative and targeted. Conservative is the forecast of a disaster. If the base and target price of oil in 2016-2019 unchanged at $40 per barrel, a conservative in those same years, a constant price of oil to $25 a barrel. In the current year this forecast is likely to come true. The chances of its implementation in the 2017-2019 years are also insignificant.

Of interest are the differences between the base and target versions. Only at target “is expected to change the orientation of the economy on the investment model of development while keeping in the early years of the forecast period, growth in consumption expenditure and social obligations of the state and business”.

That is why the GDP growth in 2017 for the target version lower than at the baseline: 100,4% compared to 100.8% of, but in 2018-2019 GDP target version pulled ahead. Respectively of 102.9 and 104.5% compared to and 101,8 102,2%. Acceleration, of course, ensure a rapid growth of investments. As for the “fried” indicators — growth in real incomes and real wages, it is only in 2017 for the targeted variant is inferior to the base. M in 2018 at growth of real incomes of the population parameters of target and base options are aligned, and in 2019 the targets ahead. As real wages indicators target options outperform the baseline in 2018.

Still, the target option — it’s only a dream of economic development. For the development of the parameters of the Federal budget 2017-2019 “it is proposed to use basic version”, and “in the social sphere the basic option provides for raising the living standards of the population on the basis of a moderate increase in social obligations of the state and business. The consequence would be restrained consumer demand.” The downside is that while there is an accelerated use of the reserve funds.

In other words, the information noise around the “anti-social” proposals, Ministry of economic development is clearly and perhaps deliberately blown out of proportion. Goal is to put pressure on the presidential Council, to push it to the adjustment of economic policy, and possibly personnel of the government. This is politics.

In any case, the last forecast of Ministry of economic development is not a game of puzzles, as already became bad tradition, and the economic policy document.

Nicholas VARDUL,

chief editor of “Financial newspaper”

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