Prime Minister Medvedev: absence of significant developments in the economy irritates everyone

Russian daily reported on Prime Minister Medvedev’s press conference in Sochi, where he talked about the Government’s results after a year in office. While certain macroeconomic indicators might be interpreted as a sign of stability – the budget deficit close to zero, low level of Government debt, low unemployment, – the state of the Russian economy is “lukewarm”, as Medvedev put it: there’s nothing good or bad going on.

Dmitry Medvedev considers the economic slowdown to be the main challenge not only to the Government, but to the society as a whole. He stated that while the central government revenues and the salaries in the country are increasing, there are no substantial developments in the economy, which irritates everyone. Medvedev had his honest moments in the past and was up to that standard when he stated that the positive macroeconomic trends in the previous year were not so much a result of the Government’s work, but a consequence of the recent positive economic cycle.  

On the other hand, the Government seems to have done quite a lot in the previous year: it implemented 111 presidential orders (out of 152 to be effected by the end of 2013), issued 3,906 of its own decrees, forwarded 269 bills to the Parliament (of which 113 passed the vote and are already signed by the President) and came up with a plan of activities until 2018, as well as the projection of long-term social and economic development by 2030.

Medvedev continued to quote positive developments, stating that approximately 400 large production facilities in Russia were modernized during the last year, with aggregate investments amounting to 500 billion rubles (USD 15.92 billion). Stimulus measures for the oil and gas sector should bring 45 trillion rubles (USD 1.43 trillion) in additional revenues by 2030. One of the major concerns for the Government, the situation in the mortgage market, still shows no signs of significant improvement: last year, the Russian banks approved 691,000 housing loans with a total value of one trillion rubles (USD 31.84 billion) and an average interest rate of 12.8 percent. In accordance with the presidential decree, the Government should strive to raise the volume of housing loans to 815,000 in 2018 and lower the interest rate to 2.2 percent above the Central Bank’s discount rate (currently at 8.25 percent).

Medvedev commented on the privatization revenues that the Government generated during the last year, saying that they were lower than expected, but are no longer seen as something “exotic”. The Government collected 217 billion rubles (USD 6.91 billion) from privatization in the last year and plans to generate 427 billion rubles (USD 13.59 billion) for the whole 2013. However, the Ministry of Finance expects that the privatization revenues will not exceed 60 billion rubles (USD 1.91 billion) in this year.

The struggle between the two opposite approaches to managing the central government budget continues as well. The President of the Russian Federation Vladimir Putin tasked the Government with taking all the necessary steps to speed up the annual GDP growth to 5-6 percent, but the Ministry of Finance expects that the Russian GDP will grow by less than half of that figure, approximately 2.4 percent. Such a discrepancy practically demands of the Government to boost investments from the central budget, which is the position shared by the Ministry of Economy. However, the Ministry of Finance is against financing large unprofitable projects in times of economic uncertainty. The decision on which approach to take is currently with the President, who promised to „put an end to this discussion“. The pension reform is another point of disagreement between the Government and the President.  At the beginning of May, President Putin complained that the Government still hasn’t come up with a transparent formula regarding individual capitalized savings. However, during his recent “direct line” with the public, Putin stated that regardless of his discontent with some of the Government’s decisions, it should be allowed more time to demonstrate its capacity.

Other interesting achievements of his Government that Medvedev mentioned were the construction of 70 new hospitals and clinics across the country, the reduction of waiting lists for nursery schools by 20 percent and the reduction of the number of convicts in Russian prisons from 818,000 in 2010 to 695,594 in April this year.  


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