Russia Still Experiences Shortage of Money

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The Russian President, Vladimir Putin, said that our country has all the conditions for improving the economic situation in 2016. The Head of State hopes that things will change for the better. ‘The combination of the budget deficit lesser than expected, the presence of good reserves, the low debt level – all this creates favorable conditions to expect the situation to remedy this year,’ he said.

In his turn, Russian Minister of Economic Development, Alexey Ulyukaev, said that the main part of the crisis has already been passed by Russia. And the only thing next is an increase in priorities. ‘A really good foundation is set up, now we must use it wisely. I think we will be able to enter the year with a moderate, cautious optimism,’ said Ulyukaev. Maxim Vasin, Chief Economist at National Rating Agency, comments:

‘With all the positive aspects, which the President named, Russian economy is still in recession and experiences a decline in key economic indicators. On the one hand, we see the continued contraction of the money supply, which means that the economy will continue to experience a shortage of money and a decline in investments in the fixed capital. Liquidity and investments deficit, high interest rates continue to put pressure on the economy. It is possible that the work in such stressful conditions would lead to the clearing of the market from weak and uncompetitive companies, but the rest would also be affected. Moreover, with the current high dynamics of saving, narrowing of the field for investment not only leads to a decrease in the quality of bank assets, but also to the capital outflow.

On the other hand, a catastrophic drop in revenue from the sale of hydrocarbons forced the government to strengthen the fiscal and administrative burden for entrepreneurs. A positive point in this decision in the short term is the maintenance of a balanced budget and social stability, however, now we need to think about the measures to stimulate domestic consumption and production. It is necessary to put the question of limiting the growth of tariffs of natural monopolies, which is putting pressure on the level of inflation. At the same time, even in the economic downturn, will be able to achieve good results large export-oriented enterprises and companies in the private sector, state-owned companies and banks, as well as domestic defense industry, which today is financed as top priority without sequestration.’

FederalPress, 27/01/2016