Vladimir N. Kniaginin, Director, Foundation Center for Strategic Research «North-West» Economic Policy Dialogue among think tanks of emerging economies

1. Trends of the Russian Federation
Economic Development
Vladimir N. Kniaginin, Director, Foundation Center for Strategic Research «North-West»
Economic Policy Dialogue among think tanks of emerging economies
November, 2013

2. Russia faces deterioration of the economic situation: while the pace of
current economic growth is reducing further instability is likely to occur
%
8,3
7,6
8,0
7,4
8,3
7,6
7,3
7,3
7,4
6,3
6,0
5,7
5,5
5,4
3,4
4%-ghetto level
6,0
5,4
4,6
4,0
6,1
3,6
3,0
4,3
3,6
4,5
3,9
4,8
4,0
4,4
3,8
4,9
4,3
3,8
4,2
3,4
4,1
3,1
3,8
2,8
3,9
3,6
2,6
2,0
0,0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2025
2030
-­‐2,0
-­‐4,0
-­‐6,0
-­‐7,6
-­‐8,0
Innovative scenario
Realistic scenario
Source: Ministry of economic development of the Russian Federation
Pessimistic scenario
2

3. Russian regions also deal with the deterioration of economic situation:
their inability to fulfill the obligations leads to the increase of regional
debt burden
The level of debt load is high or critical in 23
regions of Russia
Leningrad Region
Arkhangelsk Region
Tver Region Vologda Region
Yaroslavl Region
Kaluga Region Moscow Region
Ryazan Region
Nizhny Novgorod Region
Belgorod Region
Republic of Mordovia
Udmurtian Republic
Republic of Tatarstan
Saratov Region
Krasnodar Territory
Samara Region
Sverdlovsk Region
Volgograd Region
Orenburg Region
Republic of Sakha (Yakutia)
Krasnoyarsk Territory
Omsk Region
Kemerovo Region
Regions with most crucial debt level:
Over 28 120,00 billion rubles
From 18 373,00 to 25 403,00 billion rubles
Source: Ministry of Finance of the Russian Federation
3

4. Risks of the economic reduction in Russia are caused by the
uncertainty of commodity markets’ development
Dynamics
and
structure
of
export
of
the
Russian
Federa6on
2008
2000
24%
нефть
Oil
38%
34%
38%
газ
Gas
нефть
Oil
Gas
газ
13%
22%
Urals Oil Price Forecast , US$ per
barrel
Non-Ferrous Metals Prices
Forecasts*, US$ / t
110,8
93,9
100
80
60,9
69,6
104
113
12%
Ferrous Metals Prices Forecasts,
US$ / t
600
38118
39000
109,6
Others
прочее
8%
500
127
120
Gas
газ
Metals
металлы
15%
151
140
44%
Others
прочее
Others
прочее
160
нефть
Oil
36%
Metals
металлы
Metals
металлы
16%
2012
37000
35297
78,2
area of fiscal instability 33000
60
27000
0
376
300
31517
29000
20
31794
425
31000
40
471
395
400
35000
60,8
478
25000
200
27404
100
2010
2011-2015
2016-2020
2021-2025
2026-2030
0
2010
Source: Russian Federal State Statistics Service, Federal Customs Service of Russia, Ministry of economic development of the Russian Federation
2011-2015 2016-2020 2021-2025 2026-2030
4

5. Deterioration of the partner countries’ economic situation is also a source
of the crisis phenomena
The stagnation of the Eurozone economy is one of the
basic reasons of the Russian economic growth
reduction
GDP growth in the EU (28 countries), % per year
3
2
2
1
0
1,7
-0,4
0,4
2008
2009
2010
2011
2012
-1
-2
-3
-4
-5
-4,5
Source: Ministry of economic development of the Russian Federation
5

6. After facing the problem of the global economic recession Russia began
to deal with risks within its own economy. One of such threats is a
slowdown of the consumer market growth.
Wage growth has exhausted its sources.
Despite the positive retrospective further
wage growth rate might be significantly
reduced.
This leads to serious risks of failure to
perform most consumer obligations. Among
the main problems is a high level of loan
commitments taken by population in the
period of favorable economic conditions.
77 667 162
26628,9
23369,2
Volume of consumer crediting
to individuals saw a twice-level
growth in the last 5 years
20952,2
18637,5
17290,1
66 328 347
2013, result for 8
months
54 951 980
13593,4
42 456 010
10633,9
45 284 113 44 382 795
8554,9
6739,5
5498,5
27 841 523
billion
rubles
2003
2004
2005
2006
2007
2008
2009
2010
Source:
Russian
Federal
Treasury,
Russian
Federal
State
StaDsDcs
Service
2011
2012
2007
2008
2009
2010
2011
2012
2013
6

7. In these circumstances the Government acts as a crises damper and a
main driver of economic recovery
Financial reserved funds are used to ensure
more stability
Current operation account
60
Changes in Foreign Exchange Reserves
54
31
22
20
50
40
But in the long run it creates new risks
33
4
32
30
22
20
14
12
2013
2014
2015
2016
-­‐45
-­‐43
-­‐43
11
10
billion rubles
0
2013
2014
75
dollars
per
barrel
Source: Central Bank of the Russian Federation
2015
2016
125
dollars
per
barrel
billion rubles
75
dollars
per
barrel
125
dollars
per
barrel
7

8. The Government began to optimize its costs but until now this process
has been accompanied by an increase of social expenses
Plans to save funds of the Federal budget
(according to proposals of the Russian
Federation Ministry of Finance to reduce
public spending)
The growth of social obligations creates a
threat to the Russian budget
Share of expenditures to
healthcare, education and social
benefits in the total RF Federal
budget
581,9
2012
2008
377,1
194,5
million rubles
2014
2015
Source: Ministry of Finance of the Russian Federation
2016
8

9. Overall import growth is likely to be among new threats for Russian
economic recovery after our entering the WTO. This will have particular
impact on sectors with low level of competitiveness.
Consequences of Russia's entering the WTO for the Leningrad region and St. Petersburg industries (from 2011 till the
end of the transition period in the industry)
Change
in
produc6on
volume,
%
Change
in
skilled
labour
force
wages
,
%
Change
in
unskilled
labour
force
wages,
%
Food
industry
-­‐1,33
-­‐0,95
-­‐0,43
Light
industry
-­‐4,67
-­‐4,77
-­‐4,27
Wood
processing,
pulp
and
paper
produc6on,
produc6on
of
wooden
goods
-­‐5,21
-­‐5,05
-­‐4,56
-­‐2,3
-­‐1,73
-­‐1,21
Chemical
and
petrochemical
produc6on
1,13
1,48
2,02
Ferrous
metallurgy
33,48
36,07
34,77
Nonferrous
metallurgy
35,81
36,44
37,16
Mechanical
engineering
-­‐2,4
-­‐2,32
-­‐1,81
Produc6on
of
building
materials
-­‐2,54
-­‐2,28
-­‐1,77
Other
industries
-­‐1,35
-­‐1,45
-­‐0,94
Electricity
genera6on
0,25
0,67
1,20
Industry
Oil
goods
produc6on
Source: Russian economic school and Ernst&Young
9

10. Other new threats include an increased role of factors not related to the
global economic environment
Expenses for holding the Olympics in
SOCHI-2014
Flood 2013 in Khabarovsk territory
Flood 2013 in the Khabarovsk region
7%
37%
32%
Investors
18%
Total
expenditure
10%
General
damage
40 billion
rubles
Olympstroy
1,5
trillion
rubles
Housing
RehabilitaDon
Federal
ExecuDve
AuthoriDes
AdministraDon
of
the
Krasnodar
region
and
Sochi
VicDm
Assistance
Agricultural
losses
Others
65%
20%
Source: Ministry of regional development of the Russian Federation
11%
10

11. The Russian Government needs to respond on increased complexity of all
state development processes. It leads to changing economic policy.
What affects
development of
the Russian
Federation
Goal of the
Russian
Federation
Development
Who ensures the
goal
achievement
World competition
growth
Decline of global demand
RF workforce reduction
Creation of Smart State
Government
1. Inefficiency of state structures
2. Low quality of public
administration
Business
1. Dependence on the budget
money
2. Slow rate of implementation of
innovations
3. Low labor productivity
Individuals
1. Gap between existing
competencies and market
requirements
2. Low entrepreneurial activity
What hinders the
goal achievement
Source: D. Medvedev, «The time of simple solutions passed off» // Vedomosti, 27.09.2013
11

12. Russia tries to extend its cooperation with emerging APEC economies
RF Ministry of the Far East development has
been created and new management bodies have
been formed
AGENCY
FOR
INVESTMENT
AND
EXPORT
SUPPORT
New infrastructure is being created: Special
Economic Zones (SEZ), ports, transport
corridors
CORPORATION
OF
RUSSIAN
EAST
DEVELOPMENT
Ac#ve
policies
on
the
global
market
of
direct
investments
Crea#on
of
export
territory
of
priority
development,
industrial
and
technology
parks
Countries
of
the
Asia-­‐Pacific
Region
(APR
countries)
The
coastal
towns
of
far
East
Federal
district
(FEFD)
FOUNDATION
OF
THE
FAR
EAST
AND
BAIKAL
REGION
DEVELOPMENT
Harbin
AGENCY
OF
HUMAN
CAPITAL
DEVELOPMENT
Interna#onal
Public
Private
Partnership
in
infrastructure
projects
Policy
for
aIrac#on
of
residents
and
staffing
of
investment
projects
APR
countries
and
the
ci#es
of
FEFD
Ci#es
in
Russia
and
Ukraine
Source: Ministry of development of the Far East, Administration of Primorsky Krai
PRIMORYE 1
• Harbin
• Suifenhe
• Vladivostok
• Nakhodka
• Vostochny
Changchun
PRIMORYE 2
• Changchun
• Hunchun
• Zarubino
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13. Foundation Center for Strategic Research “North-West” – independent
think tank
Thank you for your attention!
Address:
26
line,
VI,
15-­‐2-­‐A,
St.Petersburg,
Russia,
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Phone
(fax):
+7
812
380
0320,
380
0321
E-­‐mail:
mail@csr-­‐nw.ru
Materials
are
available
at
www.csr-­‐nw.ru
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