Transcript Economic Survey of the Russian Federation

Economic Survey of the
Russian Federation
Seminar hosted by the Higher School of Economics and the Russian
Academy of Economy and Civil Service, Moscow
12 December 2011
Geoff Barnard and Tatiana Lysenko
Desk Economists, Russia/South Africa Desk
Economics Department
www.oecd.org/eco/surveys
The context: the accession process
•
Accession review by the Economic Development
and Review Committee (EDRC) in October 2011.
•
Further discussion in EDRC later, when other
Committees have completed their reviews.
•
EDRC formal opinion to be sent to OECD
Council.
•
Having received formal opinions from all
committees, Council takes final decision.
Implications of accession context for Survey
• Broad focus – the EDRC Road Map
•
Ability to resist shocks
•
Structural policy settings promoting rapid
convergence in per capita incomes
•
Governance environment suggesting that
commitments can be met sustainably
• 5 chapters: 1 on economic modernisation, 2
on macro policy, 2 on structural policy areas
Modernisation: how full is the glass?
•
To what extent has the Russian economy begun
to resemble those of OECD member countries?
•
Are policies in line with best international
practice (where that is well defined)?
•
Is the glass getting fuller?
Modernisation: how full is the glass?
•
In some areas Russian socio-economic outcomes
are within the range of OECD countries, though
towards the lower end. For example:
•
Income per capita and self-assessed wellbeing
•
Educational achievement
•
Use of information and communication
technology
Modernisation: how full is the glass?
Modernisation: how full is the glass?
Modernisation: how full is the glass?
•
•
There are some areas of
relative strength…
•
Public debt
•
Unemployment
…and some notable weak
areas
•
Life expectancy
•
Environment
Modernisation: how full is the glass?
•
Generally policies are moving in the right
direction. Many examples, including:
•
Greater emphasis on lifestyle factors for
health
•
Improved pay for teachers, judges, civil
servants
•
New environmental policy legislation
Modernisation: how full is the glass?
•
But deficiencies remain in many areas, and
some reforms have yet to show concrete actions
or measurable results
•
Dangers: “high-tech myopia” and overly stateoriented solutions
•
Broad set of complementary policies needed,
and underpinned by better framework
conditions for business.
•
The glass is getting fuller, but convergence
would be faster with intensified policy efforts.
Chapter 3
Strengthening the fiscal framework
to enhance resilience to external
shocks and safeguard sustainability
Relatively good fiscal outcomes…
10
8
6
4
2
0
-2
-4
-6
-8
-10
%
210
180
150
120
90
60
30
0
Russia
2004
2005
OECD
2006
2007
2010
2008
2009
2010
1999 or first year available¹
2011
10
%
8
6
4
2
0
-2
-4
-6
-8
-10
%
210
180
150
120
90
60
30
0
… facilitated by soaring oil prices…
USD billion
USD per barrel
100
250
200
Oil revenues (left scale)
90
Oil price (right scale)
80
70
150
60
50
100
40
30
50
20
10
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
… and supported by an institutional
mechanism to manage resource wealth
USD billion
250
200
USD per barrel
Stabilization Fund
Reserve fund
National Wealth fund
Crude Oil-Urals price (right scale)
140
120
100
150
80
60
100
40
50
20
1 Nov 11
1 Aug 11
1 May 11
1 Feb 11
1 Nov 10
1 Aug 10
1 May 10
1 Feb 10
1 Nov 09
1 Aug 09
1 May 09
1 Feb 09
1 Nov 08
1 Aug 08
1 May 08
1 Feb 08
1 Nov 07
1 Aug 07
1 May 07
1 Feb 07
1 Nov 06
1 Aug 06
0
0
The non-oil deficit is excessive
Percentage of GDP
%
%
10
10
8
8
6
6
4
4
2
0
2
-2
0
-4
-2
-6
-4
-8
Balance
-10
-6
Non-oil balance
-8
-12
-14
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
-10
Fiscal rules should be quickly restored
•Institutional constraints can lead to better fiscal
outcomes;
•No one-size-fits-all rule;
•Checklist: simplicity and transparency, flexibility
in face of shocks, stable link between targets and
objectives;
•Non-oil balance target scores well on many
dimensions
•Expenditure rule can usefully complement the
non-oil balance target;
•A well-defined escape clause is important.
December spending peaks fuel inefficiency
General government expenditure, each month as percentage of annual total
%
%
20
20
18
2001
2007
18
2010
16
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
0
Recommendations on fiscal policy
● Restore a fiscal rule like the one in the Budget Code.
● Add a rule restricting the annual increase in total expenditure
in real terms to some ceiling.
● Develop expertise on the cyclical adjustment of non-oil
revenues. Publish more detailed information on the
underlying fiscal position, highlighting uncertainties.
● Set up an independent fiscal council.
● Consider including a contingency reserve in the budget.
● Consider transferring privatisation proceeds to the National
Welfare Fund.
● Raise pensionable ages.
Chapter 4
Moving to a new framework
for monetary policy
Inflation remains relatively high
Past tensions between policy objectives
A new monetary policy framework is evolving
•
More exchange rate flexibility;
•
Greater emphasis on the CBR’s policy rates;
•
Communication of policy decisions improved;
Further steps toward (flexible) inflation targeting
•
Strengthening institutional arrangements;
•
Monitoring inflation expectations;
•
Coordination with fiscal policy;
•
Raising the effectiveness of interest rate policy;
•
The role of the exchange rate;
•
Dealing with large and volatile capital flows.
Policy transparency lags the OECD average
Policy
objective
Policy
decision
Economic
analysis
Decisionmaking
process
Overall
transparency
Russia
0.42
0.90
0.37
0.25
0.48
OECD average*
0.80
0.89
0.73
0.56
0.74
OECD maximum*
1.00
1.00
1.00
0.92
0.98
OECD minimum*
0.33
0.60
0.41
0.17
0.55
*11 OECD banks for which assessment was made
Recommendations on monetary policy
Stepping up preparations for inflation targeting
• Forex intervention should be conducted only if consistent with
price stability objective.
• Designate one or two policy rates as main instrument(s).
• Consider establishing a Monetary Policy Committee.
Improving monetary policy transparency
• Amend CBR Law to spell out price stability as primary objective.
• Hold press conferences following policy meetings and publish
minutes of the meetings and/or voting records.
• Publish the CBR’s own projections of inflation and output.
• Publish regular information about inflation expectations, and
consider developing a market for inflation-linked bonds.
Recommendations on monetary policy (cont.)
Dealing with large-scale capital inflows
•
•
•
•
•
If inflows lead to excessive pressure for rouble
appreciation, consider a range of policy responses:
fiscal tightening
macro- and micro-prudential measures
sterilised interventions
temporary market-based disincentives for such inflows.
Structural reforms aimed at financial deepening would
increase the capacity to absorb large inflows, while
product market liberalisation can alter the composition
of capital inflows in favour of FDI.
Improving the business climate
• International comparisons indicate that
the business climate in Russia is poor
Improving the business climate
• The economic consequences are serious
– Underdeveloped SME sector
– Low investment
– Sluggish innovation
– Slower convergence to OECD living standards
– Less diversification
Improving the business climate
• The need to improve the business climate
is recognised by the authorities, and there
have been numerous initiatives and
reforms
– Anti-corruption drive
– Anti-monopoly “packages”
– Loosening of strategic sectors rules
Improving the business climate
• But there are few clear signs of
improvement
Improving the business climate
• Many specific actions suggest themselves:
– Accelerate privatisation.
– Enhance consultation on regulation with affected firms,
provide for adequate transition periods, and introduce
a “deemed clearance” regime.
– Eliminate remaining subsidies to large firms put in
place during the global crisis
– Quickly ratify the WTO accession protocol and
implement the accession package.
– Ensure a level playing field between domestic and
foreign investors as regards procurement, access to
subsidies, law enforcement and dispute resolution.
Improving the business climate
• …but it may be necessary to take a more
holistic approach
– top-down anti-corruption measures more
likely to succeed if complemented by reforms
favouring political openness, transparency
and civil society participation.
– improve quality and consistency of laws and
regulations and reduce their quantity.
– make public institutions more transparent
and accountable, increase media freedom and
strengthen enforcement of laws.
Raising energy efficiency
• Russia has a very energy-intensive
economy
Raising energy efficiency
• …and this contributes to poor
environmental outcomes
Raising energy efficiency
• …as well as hindering competitiveness and
reducing national income
Raising energy efficiency
• There have been important steps taken in
recent years…
– Federal Law No. 261 “On energy saving and
improving energy efficiency”
– Creation of the Russian Energy Agency
– Energy efficiency listed as the first of five
priorities in the work of the Commission on
Modernisation and Technological Development
of the Economy
Raising energy efficiency
• … but one problem is that energy prices in
Russia are still too low
Raising energy efficiency
• … while final users need to be able to
measure and regulate their consumption
to a greater degree.
Raising energy efficiency
• At least until energy prices equal marginal
social costs, other measures could help
– mandatory fuel efficiency standards, eco-driving
programmes, and development of traffic
management and road infrastructure.
– Remove obstacles to the development of energy
service companies.
– Develop instruments to mobilise financing for
the renovation of the housing stock and to speed
up the rate of renovation.
Concluding remarks
• Russia’s weaknesses are interrelated and
self-reinforcing
• But negative feedback mechanisms could
be turned around
•
A combination of sound macroeconomic
policies, an improved business climate and
greater energy efficiency would accelerate
modernisation and raise living standards.
Economic Survey of the Russian Federation
Thank you for your attention.
www.oecd.org/eco/surveys
[email protected]
[email protected]