ECONOMIC & POLITICAL OUTLOOK 2018
RUSSIA BEFORE AND AFTER PRESIDENTIAL ELECTIONS
Vadim Grishin G-GLOBAL
February 28, 2018
USRBC| U.S. – Russia Business Council Russian Presidential Candidates Approval Rating, %, 2018
69.9 70 69.5
60
50 Approval Rating, %, 2018 January 40
30 Approval Rating, %, 20 2018 February 7.2 7.5 10 5.9 5.3 0.91.4 1.2 0.9 0 0.4 0.3 0.3 0 0.1 0
Source: VCIOM PAVEL GRUDININ
• A change in economic strategy • A return to economic sovereignty in Russia • A return to credit use in the economy • Further industrialization and modernization of the economy • Price controls for basic products and essential goods, along with utility tariffs • A return to free education and medical care • A return to soviet style democracy and “people's representation” VLADIMIR ZHIRINOVSKY
• No one will be unemployed, homeless or hungry • Passports will be issued to all ethnic Russians, including those abroad • Advocates rapid development of the road networks and trains that travel 400 km/h • Wants to deliver a powerful blow to crime and create military courts; cancel moratorium on death penalty • Remove the President’s Residence from the Kremlin • Would not allow more than 10% of negative information to be broadcast • Would abolish the Federal Council • Wants to limit the number of immigrants coming to Russia GRIGORY YAVLINSKY
- Stop the aggressive confrontations and the war against Ukraine - Accept and implement strictly plans for a phased withdrawal of Russian troops from Syria - Normalize diplomatic, economic and military relations with the European Union and the United States - Improve political and public life within the country - Ensure the inviolability of private property - Legitimize large private property ownership acquired through collateral auctions by using a system of windfall tax and compensation payments - Provide a basic income to citizens by opening nominal accounts, created out of funds received from the export of natural resources KSENIA SOBCHAK
• All large state corporations should be privatized with antitrust restrictions • State's share in enterprises and industries should be limited to broken up monopolies • Private property should be protected by law • Consideration of ownership and nationalization should be possible only on a reimbursable basis with independent market valuations • Reform of taxation, along with regulatory legislation and practices, should stimulate private entrepreneurship, technological and innovative enterprises • The list of licensed branches of the economy should be significantly reduced BORIS TITOV
• Main objective of the new economic policy is to move away from macroeconomic stabilization • Goal: to double or even triple GDP by 2035; • Solutions: shift to a moderate monetary polity (Quantitative Easing as an option for Russia) • Provide a stable exchange rate • Set a threshold of budget deficit equal to 3 percent of GDP, and a government debt limit to 35% of GDP (12.6% in 2017) • Introduce separate elements of “smooth” exchange controls, including a limit to the foreign exchange positions of banks
Mr. Titov continues to believe that CBR wrongly combats a non-monetary inflation through monetary means
Source: Strategy of Growth Inflation Rate, Average Consumer Prices, % 2014-2020
18
16
14
12 2014 10 2015 8 2016 6 2017 4 2018*
2 2019* 2020* 0 Russia Brazil India China South USA Africa
* Projections Sources: IMF & World Bank SRATEGY 2035 Kudrin’s Plan of Reforms
• Organize a state as a platform • Create new transitional institutions • Rely on a technological revolution • Double non-primary exports • Decrease state share in the economy • Invest heavily in human development • Implement a pension reform • Work with new regional and city policies • Maintain low inflation • Carry out judicial reforms • Adjust foreign policy to the needs of economic growth • Move towards accountable political systems with checks and balances, real competition and reduction of paternalistic arrangments SRATEGY 2035 Kudrin’s Plan of Reforms (cont.) Targets: • Raise output up to 30% by 2024 • Sustain real GDP growth at 3.68% annually • Increase income per person by 25% • Reduce poverty by 25% • Raise life expectancy by an average of 78 years (was 72.5 years overall in 2017, and 67.5 years for men) Realize the planning and implementation of a national development strategy through the Center for Efficient Management, headed by the First Deputy Prime-Minister Real GDP Growth, % Change over Previous Year 2014- 2020
10
8
6 2014
4 2015 2016 2 2017 2018* 0 2019*
-2 2020*
-4
* Projections -6 Sources: IMF & World Bank Industrial Production Growth, YoY, % 2014-2017
10
8
6
4 2014 2 2015
0 2016 2017 -2 Russia Brazil India China USA Q4 2017 -4 Jan-18
-6
-8
-10 Sources: IMF & World Bank RUSSIA, ECONOMIC GROWTH, % 2017- 2022
2017 2018 2019 2020 2021 2022 GDP 1.8 1.7 1.8 1.6 1.7 1.8 Pvt. cons. 3.5 3.8 3.0 2.7 3.7 3.4 Gov. cons. -0.1 0.1 -0.5 0.4 0.3 0.1 Gross fixed 3.9 3.2 1.5 1.8 2.0 1.8 invest. Export 4.9 2.7 3.4 1.9 4.4 3.9 Import 12.6 3.2 4.2 3.2 8.6 2.2 Dom. dem. 4.1 2.5 1.1 3.2 3.7 1.3
Agriculture 2.0 1.5 1.7 1.5 1.7 1.5 Industry 3.0 1.1 1.3 1.5 1.4 1.6 Services 1.2 2.1 2.1 1.7 1.8 1.9
Source: Economist Intelligence Unit OIL SUPPLY TOTAL LIQUID PRODACTION (‘000 b/d)
11,500.00
11,400.00
11,300.00
11,200.00
11,100.00
11,000.00
10,900.00
10,800.00
10,700.00 2015 2016 2017 2018* 2019* 2020* 2021* 2022*
* Projections Sources: BP & EIA NATURAL GAS SUPPLY (kilotonne of oil equivalent)
580,000
570,000
560,000
550,000
540,000
530,000
520,000
510,000
500,000
490,000 2015 2016 2017 2018* 2019* 2020* 2021* 2022*
Sources: EIA & BP Main Sources of Revenue, %
Excise Tax Profit Tax 5% 4% Import Ditues 5%
VAT (Imports) Oil & Gas 15% 50%
VAT (Domestic) 21%
Source: Ministry of Finance of Russia Main Areas of Expenditure, %
Transfers to Regional Budgets State Administration 5% 8%
Social Policy 31% Law and Order 15%
National Economy 17% Defence 24%
Source: Ministry of Finance of Russia Advanced Economies: Debt Developments, % of GDP 2008- 2019
300
250
200
2008
150 2017 2018 2019 100
50
0 United States Canada Japan France Great Britain Italy Spain Eurozone US-Russia Export, Import & Gross Trade, millions $US, 1992- 2016 45000 Oil price record high in 2011-2012 Oil Prices Crashed (more than 111 $US per barrel) 40000 Ukrainian Crisis Sanctions Global Financial Crisis 35000
30000
25000
20000 Millions Millions $US
15000 Russian Financial Crisis 10000
5000
0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
IYR EYR gross
Source: U.S. Census Bureau