Russia's economy minister announces New Year microcrisis

The beginning of 2019 will be a challenging period for Russia's economy because of external and internal factors, Russian Minister of Economic Development Maxim Oreshkin said. 

"We have the whole range of factors converging now: this is the challenging global situation, volatility on commodity markets, and declining demand for Russian export products at large due to global economy’s slowdown," the minister said in an interview with Rossiya-24 TV channel.

"The VAT increase in Russia will take a portion of consumer demand in particular. The Central Bank’s policy for restriction of potential risks of inflation pressure growth in future will also influence in a restrictive way on economic dynamics and lending in early 2019," TASS cited Oreshkin as saying.

The head of the department of stock markets and financial engineering of the Faculty of Finance and the Banking Business of RANEPA, former deputy chairman of the Central Bank of Russia Konstantin Korischenko, speaking with Vestnik Kavkaza, noted that it is impossible to speak of substantial growth of the Russian economy. "We do not have much growth to wait for a decline at the beginning of the year. 1-2% growth per year is an indicator on the verge of statistical error, and it’s not entirely correct to discuss whether we will have a recession. Rather, it’s about that we will not see any significant growth, and there are many reasons for this, not only the VAT increase and volatility on commodity markets, but also the ruble volatility, the sanctions and a number of internal problems," he said.

The situation will not change until the proper conditions for the development of the Russian economy are created. "Today, the country’s economic policy does not stimulate economic growth substantially. These include high interest rates, budget surplus, tax policy, a large government share in the economy,” Konstantin Korishchenko stressed.

Professor of the RANEPA faculty of Finance, Money Circulation and Credit Yuri Yudenkov noted that one of the problems voiced by Oreshkin was arranged by the state. "Why would a head of a social department give such a pessimistic forecast? Yes, it will not be easy, especially since the Ministry of Finance initiated the VAT increase. The scheme of this increase is not the most thoughtful. The current decisions of the economic ministry do not improve the state of the Russian economy with this additional taxation. But I would call it difficulties, not a recession, since growth at the beginning of winter will be near zero," he expects.

As for growth prospects, they are linked primarily to the engineering industry. "If our heavy machinery starts supplying means of production, equipment for other industries, the rest of the industrial sector will have an opportunity for development and growth. In general, economic development and acceleration of this development are possible only with significant additional investment," Yuri Yudenkov concluded.