reports that the disposable real income in Russia dropped by 8.3% on a yearly basis in August 2016. This turns out to be an even worse drop than the one registered in August 2009, when the disposable income fell by 8.2%.
Real income in Russia continues to fall at an increasing rate – the annual drop in June was 4.8%, while in July it already increased to 7.3%. Real income in Russia has been in continuous decline since October 2014.
…but not just to hurt the biggest exporter of salt to Russia that happens to be Ukraine.
Business daily Vedomosti reports that the Russian Government added salt to the list of banned imports, a countermeasure to the western sanctions introduced after Russia annexed Crimea in March 2014. Salt suppliers from the Ukraine, United States, European Union, Canada, Australia, Norway and some other countries can no longer export to the Russian Federation. The ban would seem like just another jab in Russia’s continuing exchange with the West if there wasn’t for a peculiar coincidence: at the end of July 2016, Russian General Prosecutor’s son Artem Chayka became the owner of the second largest Russian salt producer, Tiretsky Salt Plant.
Russian Consumer Protection Service already banned salt imports to Russia from Ukrainian “Artemsol” in 2015 for alleged noncompliance with quality requirements. As a result, Tiretsky Salt Plant’s sales jumped by 42% to 1.3 billion rubles (USD 20 million).
Russian Government’s Analytical Center warned that the food embargo has a negative effect on the competition in the market, leads to price increases and lower food quality.
Russian portal Slon.ru published a transcript of the interview with Vladimir Yevtushenkov, Russian businessman who enjoyed USD 9 billion of his worth before he was apprehended for participation in the allegedly illegal privatization of Bashneft oil company that the Russian Government seeked and managed to annul, apparently for the purpose of re-privatization (in lack of a better term for this uncanny process), this time by the state-owned Rosneft. The interview is interesting for Evtushenkov’s blase attitude to what certainly looks like a coarse extortion (not long before his arrest, Evtushenkov refused Rosneft’s offer to take Bashneft off his hands) and his complete resignation to the state of affairs in Russia. Asked about the frequent crackdowns on Russian businessmen including Viktor Vekselberg, Mikhail Slobodin (former CEO of a Russian mobile operator Vimpelkom), Mikhail Prokhorov, former director of Rosnano Leonid Melamed, owner of the Domodedovo airport Dmitry Kamenshchik (apprehended under ridiculous charges of gross negligence for failing to prevent the 2011 terrorist attack at the airport that left 37 people dead), Evtushenkov calmly replied: “What can I tell you? This is our homeland”. Perhaps this is a point that too many people in Russia tend to carry home.
According to Vedomosti.ru
, the Russian Ministry of Finance believes that balancing the federal budget in the short term will require the Government to sell assets, drain the reserve funds and rise taxes. In order to cut the deficit from the projected 3.2% of GDP in 2017 to 1.2% of GDP in 2019, the Ministry of Finance needs to collect additional 2.5 trillion rubles (USD 38 billion) in the period 2017-2019. Revenues will be sourced from oil and gas companies, tobacco and soft drinks sales, e-commerce and state-owned companies.
The Ministry of Finance is not considering spending cuts, as the Government fixed the planned annual expenditures for the period at 15.79 trillion rubles (USD 242 billion). Therefore, the only option is to look for other sources of revenue, such as the increase of corporate tax, VAT, personal income tax and social security contributions. For example, the Ministry of Finance is considering increasing the personal income tax from the current 13% to 15-16%. The Ministry warns against rising the corporate tax rate, as it would negatively affect the investment climate. It advocates for the reduction of a unified social insurance rate to 20% and the VAT rate increase from 18% to 24%.
While Russian government officials are uncertain what measures will be undertaken to tackle the budget deficit, a source with the Federal Government stated that changes will have to take place by July 2018 or January 2019.