Transcript Lecture slides File

1
Anti-crisis State Policy
in Russia
Vera Kononova
Institute for Complex Strategic Studies
Lomonosov Moscow State University Business School
17 May 2016
Lomonosov Moscow State University
Business School
Seminar Outline
1. Anti-crisis Policy Goals
• The main goals and targets adopted by the Government of
Russia and the Central Bank of Russia in 2014-2016
2. Anti-crisis activities of the Central Bank of Russia
• Monetary tightening, free float ruble exchange rate
3. Anti-crisis policy of the Government of Russia
• Recapitalization of banks, set of industrial policy measures
(interest rate subsidies, project financing), budget subsidies for
the certain kinds of loans
• Budget conservation as a limitation on Government initiatives
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1. Anti-crisis Policy Goals
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Goals of fiscal and monetary authorities
The Government of the
Russian Federation
“We have a very complex task: to
conduct structural reforms and
prevent decline in living standards”
Multiple goals
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The Central Bank of the
Russian Federation
“Our main goal is to slow
down inflation to 4%”
Single goal
Multiple goals of the Government
Short-term goals
Long-term goals
• Ensure social stability (support for the
most vulnerable groups)
• Support of “backbone” enterprises
• Support of the most affected industries
(automobile industry, agriculture,
housing construction, transportation
and tourism services)
• Budget economy (maximum deficit 3%
GDP per year)
• Structural reforms (accelerated dev-t of
non-commodities production) and import
substitution
• Institutional reform (the task to create
encouraging environment for doing
business)
• Modernization of infrastructure, facilities
and technologies
• Budget economy (zero deficit)
Anti-crisis plans
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Inflation targeting goal of the Central Bank
The Central Bank of Russia (CBR) adopted the inflation targeting policy
that became the main direction of it’s activities in 2014-2016
Actual and targeted inflation
Bank of Russia forecast
Actual
Source: Rosstat, CBR
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Mid-term goal
Source: CBR
How the anti-crisis policy is being conducted
The specific entities are responsible for monitoring the economic situation
and implementation of anti-crisis action plans
Governmental Commission for economic development and integration
(Ministers, head of the CBR, heads of the major banks and development
institutions, governors, academic experts)
The Anti-crisis Plans of the
Government
2015
Interdepartmental Working Group (deputy ministers, deputy head of the CBR,
rep-s of other departments and entities)
4 interdepartmental working groups under Ministry of Finance, Ministry of Economic
Development, Ministry of Industry, Ministry of Agriculture
Companies, industrial unions
Regional anti-crisis commissions
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2016
Economic and
Social Stability Plan
for 2015
(60 items)
Government’s
action plan for 2016
(120 items)
2. Anti-crisis activities of the
Central Bank of Russia
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Main directions of the CBR policy
Policy instruments in 2014-2016
Main building of the Central Bank of Russia (Moscow)
 High interest rates - to stop
capital outflow and bring the
inflation down
 Tight bank control
(compliance with the new
banking regulations)
 “Free float” of ruble
exchange rate (end of 2014)
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Interest rate policy in 2014-2016
After the sharp increase in Dec 2014, the
key rate of the CBR is still kept on high level
of 11%. This results in the high interest rates
for all kinds of loans.
Interest rates for loans to non-financials (<1 year)
Source: CBR
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Date
CBR Key rate, %
Feb 3, 2014
5,75
Mar 3, 2014
7,0
Apr 28, 2014
7,5
Jul 28, 2014
8,0
Nov 5, 2014
9,5
Dec 12, 2014
10,5
Dec 16, 2014
17,0
Feb 2, 2015
15,0
Mar 16, 2015
14,0
May 5, 2015
12,5
Jun 16, 2015
11,5
Aug 3, 2015 - present
11,0
Banking system control
Since 2014, the CBR follows the policy of strict banking control. Failure to
comply with the rules of the CBR results in license revocation
License revocation summary
• In 2014 the regulator revoked licenses from 84 credit institutions for
the unsatisfactory quality of assets, loss of capital, risky lending
policies and dubious transit transactions
• In 2015 the licenses were revoked from 93 credit institutions
• In Q1 2016 – from 32 banks
• As of March 1, 2016, Russian banking system consisted of 665 banks
Source: CBR
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Ruble exchange rate
In November 2014 the CBR declared the free float of ruble exchange rate.
That was followed by a 2-fold devaluation and sharp increase in volatility.
Deviation of RUB/USD exchange rate
from year average
Nominal and real exchange rates
for RUB/USD
80
RUR/USD
160
Official exchange rate, RUR/USD, end of period
янв.16
2015
2014
2013
0
2012
0
2011
20
2010
10
2009
40
2008
20
2007
60
2006
30
2005
80
2004
40
2003
100
2002
50
2001
120
2000
60
1999
140
1998
70
Real exchange rate index, RUR/USD, 1997 = 100% (right scale)
Source: CBR, ICSS estimates
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3. Anti-crisis policy of the
Government
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Main directions of the Government policy
The most important policy
instruments in 2014-2016
The House of the Government of Russia (Moscow)
 Recapitalization of banks in
2015
 Providing accessible loans for
selected investment projects
 Regional development
mechanisms
 Attempts to minimize budget
deficit
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Recapitalization of banks
The aim of the program is to expand the opportunities of banks to provide
business loans and home loans
Federal Budget
Eligible banks (initially):
capital > 25 bln rub (only
30 banks satisfy),
share of consumer loans
< 40% in total loans
(27 banks selected)
Mid-2015: regional banks
with capital > 5 bln rub
(10 banks selected)
Association for Deposits Insurance
CBR
Subordinate loans (gov-t bonds)
Bank 1
Bank 2
...
Refinancing
Bank N
Loan volume: equal to 25% capital (7,5% for regional banks)
Obligation to expand home loans, loans to companies (SMEs and
companies from the list of priority industries) to at least 12% per year
Source: Acts of RF Government, CBR
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Accessible loans
This group of programs aims to provide cheaper funding for the selected
projects, however, the total amount of funding is much less than demanded
Programs
Interest
rate, %
Comments
Project Financing
Program (2015)
11-11,5%
Banks provide loans for selected priority projects
(then the loans are refinanced by the CBR). In 2015
42 projects received 232,5 bln rub (3 bln EUR).
Loans from Industrial
5%
Development Fund (20152016)
In 2015 the Fund selected 74 priority projects out of
1282 applications. Total funding was 20 bln rub (~250
mln EUR)
Home Loans with
Government Support
(2015-2016)
In 2015 the authorized banks received a 3,5% budget
subsidy for home loans with lower rate (12% or less)
for new construction. The share of subsidized loans
on home loan market was about 40-50% in 2015.
< 12%
Source: Acts of RF Government, mass media
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Regional Development Mechanisms
The Far East of Russia is priority region, where “accelerated development
territories” and other mechanisms were introduced in 2014-2015
Government of Russia
The Regions of Far East of Russia
Ministry for Development of Far East
Far East Development
Corporation
Far East
Development Fund
Accelerated development territories
9 Low-tax and duty-free business parks with new
infrastructure
Free Port Vladivostok
Low-tax and duty-free logistics zone
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The Task of Budget Conservation
The task of minimization of federal budget deficit by no more than 3% GDP
imposes limits on many Government anti-crisis initiatives.
Federal budget balance
10%
8%
6%
Sovereign oil funds
% GDP
250
7,4%
5,4%
USD bln
National Wealth Fund
Reserve Fund
200
4,1%
4%
150
2%
0,8%
0%
100
-0,1%
-2%
-0,4%
-2,6%
-4%
50
-3,9%
-6%
Source: Ministry of Finance
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Jul-15
Dec-15
Feb-15
Apr-14
Sep-14
Nov-13
Jun-13
Jan-13
Aug-12
Oct-11
Mar-12
Dec-10
May-11
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Jul-10
0
-6,0%
Jan-08
Jun-08
Nov-08
Apr-09
Sep-09
Feb-10
-8%
-0,5%
Source: Ministry of Finance
Decline of oil and gas revenues
Before 2015, about 50% of federal budget revenues were “oil and gas
revenues”. In 2015 their share decreased to 42,9%, in Q1 2016 – to 34%
• Export duties on oil, gas
and petroleum products
• Revenues from Natural
resource Tax on oil and
gas
• The dropdown in these
revenues was observed
despite the devaluation
of ruble
Structure of federal budget revenues
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2013
other revenues
2014
2015
oil and gas revenues
Source: Ministry of Finance
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Public expenditures in Russia (federal level)
The largest part
of federal
budget goes to
high priority
goals: social aid
and national
defense
16 000
transfers to regional budgets
bln RUB
public debt service
14 000
mass media
physical culture and sports
12 000
social policy
10 000
public health
culture and cinema
8 000
education
6 000
environment protection
housing - public utilities
4 000
national economy
2 000
law enforcement and security
national defence
0
2013
2014
2015
general government
Source: Ministry of Finance
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Thank you for your attention!
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