Russian Ministry of Economic Development renews crisis forecast

 Russian Ministry of Economic Development renews crisis forecast

The Russian Ministry of Economic Development is preparing a new outlook for the development of the Russian economy until 2019. The official forecast for 2016-2018 has already expired, so the agency will submit a new document by April, the Vedomosti newspaper reports.

The main condition for this prediction is the price of oil, which, according to the ministry, will remain below $50 per barrel.

The basic version's average price this year is $35 and $40, $45 and $45 for next three years, respectively. The conservative version's oil price is $10 less than the basic version. "The optimistic option coincides with the base one.

"The basic hypothesis" suggests the acceleration of world economic growth at the expense of developed countries, preservation of sanctions against Russia and response to sanctions prior to 2020. The limited access to capital markets will reduce the outflow of capital from $35 billion in 2016 to $15 billion in 2019, the Ministry of Economic Development believes.

In addition, the budget will continue to save on social costs. Pensions will be indexed annually by 4%.

Professor of the Russian Academy of Justice, Anatoly Selyukov, in an interview with a correspondent of Vestnik Kavkaza urged "not to focus only on crude oil and other raw material sources." "They certainly have a certain impact, but it is necessary to use the energy of our society, use the opportunities which exist in our country. They are suppressed by the current system, which doesn't allow to use the potential which was in the Soviet Union before and after the war. And now we are focused only on the oil price, which is very sad. I believe that the Ministry of Economic Development is using the wrong methodology," he said.

Speaking about the attainability of an inflation rate of 4%, the expert expressed doubts. "The inflation, unfortunately, will be over 10%. I would be very happy if it was 4%. They need to use the recommendations prepared by the Academician Sergey Glazyev. First of all, it is necessary to introduce new money into the economy for further development of the regions. If we make more goods, inflation will be less. That's the main idea, which was expressed not only by Glazyev, but also by other savvy professionals," the economist said.

According to him, in the current situation, cost constraints in the social sphere will be implemented. "But I don't want it to happen, because maintaining the population is the primary task for the state. And if it doesn't do it enough, we need to change something in the policy of the state," Anatoly Selyukov suggested.

The director of the center for research into regional reforms of the Institute of Applied Economic Research of RANEPA, Alexander Deryugin, expressed the view that "an inflation rate of 4% is not achievable under any circumstances in the next three years." "I mean realistic conditions," he said.

In the face of the deteriorating economic situation, the expert considers limitations in the social sphere will be inevitable. "There are restrictions, which mean that indexing will be substantially below the level of inflation after transition to a new formula for calculating average wages in the economy. As I recall, they propose freezing the indexing of salaries of civil servants. Accordingly, the indexing of these costs to the level below inflation will be the main driver of cost savings. Although for some reason there was nothing about military spending, which could also be considered as an alternative to reduce costs," Alexander Deryugin said.