Discussion about the future of the Russian economy at Gaidar Forum

Discussion about the future of the Russian economy at Gaidar Forum
Discussion about the future of the Russian economy at Gaidar ForumThe Gaidar Forum-2015 "Russia and the World: New Dimensions" started today. It will be held in RANEPA on January 14-16 and will be devoted to the modern economic development of Russia. During the panel discussion "A Healthy Future for the Economy", moderated by former Finance Minister Alexei Kudrin, Deputy Prime Minister Olga Golodets, Economic Development Minister Alexei Ulyukayev, Minister of Finance Anton Siluanov, Chairman of the Board of "Sberbank of Russia" Herman Gref, and CEO of Danone Emmanual Faber and professor at Harvard University Kenneth Rogoff discussed the following questions: "Is man for the economy or is the economy for man?", "Effective structure of budget expenditures", "Human capital: spending or investment?" and "A healthy population: income or expense?" The chairman of the board of tge Sberbank of Russia, Herman Gref, explained that the economic crisis now in Russia was due to several factors. One of them, according to the economist, is "economic slowdown." This situation can be corrected. "This is a key point that lends itself to government influence, and we can discuss the actions to be taken," said Gref. In addition, the established geopolitical situation has adverse effects, in particular, the crisis in Ukraine and anti-Russian sanctions - the head of Sberbank said. Gref urged people not to panic, because after a rapid decline in oil prices, they should subsequently rise. At the same time, the economist gave a very positive outlook for oil prices; in his estimation, "oil may remain for several years at $60-70 per barrel." In any case, due to the fall in oil prices Russia is losing 4 trillion rubles, said Gref. There are several options for behavior in this situation. "It is possible to adjust costs based on lower returns. You can leave them unchanged by funding from the missing funds, and you can spend all the funds in 1.5-2 years. It is possible to raise taxes, but Vladimir Putin made a statement about saving taxes for three years. And we can use the issue of the Central Bank," he said.

The Gaidar Forum-2015 "Russia and the World: New Dimensions" started today.

 

It will be held in RANEPA on January 14-16 and will be devoted to the modern economic development of Russia. During the panel discussion "A Healthy Future for the Economy", moderated by former Finance Minister Alexei Kudrin, Deputy Prime Minister Olga Golodets, Economic Development Minister Alexei Ulyukayev, Minister of Finance Anton Siluanov, Chairman of the Board of "Sberbank of Russia" Herman Gref, and CEO of Danone Emmanual Faber and professor at Harvard University Kenneth Rogoff discussed the following questions: "Is man for the economy or is the economy for man?", "Effective structure of budget expenditures", "Human capital: spending or investment?" and "A healthy population: income or expense?"

 

The chairman of the board of tge Sberbank of Russia, Herman Gref, explained that the economic crisis now in Russia was due to several factors. One of them, according to the economist, is "economic slowdown." This situation can be corrected. "This is a key point that lends itself to government influence, and we can discuss the actions to be taken," said Gref.

 

In addition, the established geopolitical situation has adverse effects, in particular, the crisis in Ukraine and anti-Russian sanctions - the head of Sberbank said. Gref urged people not to panic, because after a rapid decline in oil prices, they should subsequently rise. At the same time, the economist gave a very positive outlook for oil prices; in his estimation, "oil may remain for several years at $60-70 per barrel." In any case, due to the fall in oil prices Russia is losing 4 trillion rubles, said Gref.

 

There are several options for behavior in this situation. "It is possible to adjust costs based on lower returns. You can leave them unchanged by funding from the missing funds, and you can spend all the funds in 1.5-2 years. It is possible to raise taxes, but Vladimir Putin made a statement about saving taxes for three years. And we can use the issue of the Central Bank," he said.

 

The CEO of Sberbank called for active actions to be started to save the Russian economy, as the country is unlikely to raise the price of oil. "We can hardly influence the oil price, and I would not expect to sit and wait for a rebound in prices, when everything will be fine. So, good as it was, it won't be. We still need to deal with internal problems," he said.

 

"The structural economic slowdown began earlier, and low growth this year would be observed regardless of the exogenous factors," Gref said. The economist outlined the main scope of work for the Russian government. "We have a problem of poor investment climate, and we need a breakthrough here. The key reform is public administration and public services reform. It is also necessary to solve the problem in the judicial and law enforcement systems," he believes.

 

The reform process should, according to Gref, affect all the basic elements of the economy. "We have no alternatives to the next steps. It is necessary to maintain the level of current budgetary expenditures, and the Ministry of Finance and Ministry of Economy will solve nothing here. Also, we need a radical change in economic policy, which will lead to a paradigm shift, restoring business confidence to power. It is impossible without this," he stressed.

 

"Then we need to reform state power at all levels of management, introduce performance management, project management, process management, human resource management and a number of things. Modern methods of management have not been implemented even 5%: we cannot be called a country with any effective control system," the chairman of the board of Sberbank expressed his opinion.

 

Minister of Economic Development of Russia Alexei Ulyukayev, in his speech put special emphasis on the fact that the measures taken by the government now should be aimed at solving internal problems in the Russian economy. "We are in a new economic reality, and the situation will never be the same, it will be much more complex, difficult to predict. Our measures must be just as competent when the price of oil is at $130 per barrel as when it's at $30," he said.

 

Ulyukayev is convinced that the main focus in the resolution of the current crisis shouldn't be given to supporting the state budget, which, after the sad experience of 2008-2009, is equipped with defense mechanisms and caring for people and businesses. "There is a big difference between 2008-2009 and what is happening now. For the budget, no matter how much oil costs in dollars, it is important how much it costs in rubles," said the politician.

 

"But the budgets of households and businesses are protected worse. We need to get away from the statist position when one considers that only the state and its obligations are important. Now it is necessary to focus on business and households," Ulyukayev said.

 

"Our measures should reduce shocks for the population and business, to allow them to get through this difficult time and look if we can do something constructive and creative. We can support the most flexible structures and win. I mean small and medium-sized business which are ready to receive signals now. To help them a little - to reduce the regulatory burden, to abandon the check and control system for small businesses and the tax burden is almost entirely through the patent system with the lowest price of the patent, for example. This is a real diversification of the economy and the removal of problems from the population," the Minister said.

 

"The second possibility is exports, promotion in the field of non-oil exports," Alexei Ulyukayev added.

Russian Minister of Finance Anton Siluanov spoke about the need to get rid of Russian dependence on prices of energy resources. "The situation could have been better if we had prepared for it. It was necessary to focus on the modest, real income, which the budget and population receive. Russia has a $180 billion shortfall in revenues due to the drop in oil prices. The shortfall in revenues created by Western sanctions is expected to be between $40 billion and $60 billion," said the Minister. Russia can improve the situation in the economy at the expense of investment, Siluanov believes.

 

"Investments in Russia now would be attractive if the rates were not so high. We need to solve the problem of inflation as quickly as possible," he said. "There are problems with the sources of financing the budget deficit. We need to adjust our capacity. We cannot spend as much as we did during the growth of the economy and high oil prices," he warned.

 

According to Siluanov, we are talking about the reduction and optimization of costs, and it must be done as soon as possible. "The minimum objective for 2015: to enforce the obligations of the budget. We propose cutting budget costs by 10% across all sectors, except for military spending. This will reduce the cost of 1 trillion rubles. But this is not enough. Otherwise, you can spend all the reserves in a year and half, and then hope for the best. But this does not happen. And we need to abandon expenditure that we cannot carry out," the Minister said. According to Siluanov, at the same time it makes sense to take a flexible approach to the problem. "We now have the budget implying an increase in costs of 11%. It is not necessary to reduce costs, you can increase them, but by no more than 5%. For this you need to transfer part of the cost at a later date," he explained. In 2016-2018 it is necessary to carry out structural reforms in the spheres of pensions, defense and social services, to do everything to help structural changes in the budget to get through the next period," he said.

 

Deputy Prime Minister Olga Golodets said that the most important thing in economic policy is setting goals. It is necessary to make serious efforts to evaluate the cost-effectiveness. In 2012-2013, 900 billion rubles of inefficient spending in the social sphere was consolidated and transferred to the budget. The costs that we cut did not find a more efficient application. We have not seen the increase that would be expected from an investment of nearly $1 trillion rubles. It is a challenge - efficient use of each ruble, as well as the turnover of funds," she said.

 

At the same time, according to Golodets, social spending is also an effective means of stimulating economic growth. "We had two objectives in the social sphere. The first is the preservation of purchasing power and standard of living for certain categories of the population. And that population is closest to reality -pensioners, whi will balance in the direction of falling of real incomes, families with children -they produce the most efficient consumption: domestic goods and domestic tourism. The means that we will send to their support is one of the most effective measures for the development of the economic situation," she said.

 

"Of course, here we have limitations, particularly the prohibitive interest rate on the loan, but I hope that our economists will be able to solve this problem, because it is managed, and move on to the real interest rate, which will automatically solve the problem of economic growth. The initiation of a large program to support the drivers of our economy will give the economy a distinct chance of rebuilding itself and reaching an entirely new structure," Olga Golodets added.

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