Russian Economy General News: #7

Austin wrote:Japan has domestic debt level of 250 % of GDP and they are doing fine , they havent collapsed

Having a project 15.7 % of state GDP to Debt ratio by 2019 is penuts , My own country India has public GDP to Debt ratio of around 50 % if you add the state debt it adds to around 67 %

Rmf wrote:

Austin wrote:Japan has domestic debt level of 250 % of GDP and they are doing fine , they havent collapsed

Having a project 15.7 % of state GDP to Debt ratio by 2019 is penuts , My own country India has public GDP to Debt ratio of around 50 % if you add the state debt it adds to around 67 %

yes but they havent grown for over 20 yrs, they have zombie economy , if you go to japan its like you back in time to late 80s. and they are slowly losing the edge in many industries.

Boris Titov: implementation of the "Growth Strategy" will allow Russia by 2035 to double the GDP

http://www.interfax.ru/interview/550606

Business Ombudsman spoke about the essence of the documents and the discrepancy with the proposals of the Center for Strategic Research

- The main targets of the program?

- The essence of the strategy is that in the present circumstances only the market, private business, competition could save the Russian economy.

The main indicator - GDP growth. We believe that in 2019 the growth should be 3.5 - 5%. Growth of 4-6% should remain until 2025. Then he may decline slightly by 2035 to 3-3.5%.

The consistent increase in the rate of growth and improvement of its quality will double the GDP by 2035.

The first stage of "Growth Strategy," (2017 - 2019 gg) we conventionally call "New Industrialization", whose mission - to restore economic growth. We must reach 30 thousand. Dollars of GDP per capita at purchasing power parity (PPP).

The second stage - "Innovative Economy" (2020- 2025 years), involves access to high speed and quality of economic growth and should provide 40 thousand dollars per capita at PPP.

The third stage - "Knowledge Economy" (2026 - 2035 years) involves ensuring sustainable development of the country with access to 45 thousand dollars per capita at PPP..

We believe that each of these stages has its own economic characteristics.

The first stage - is the use of domestic demand as the main driver of growth - import substitution and the use of traditional exports. There should be moderately low exchange rate of the ruble. That is, we have to support import substitution, to stimulate domestic producers. Thus the development should be provided primarily existing competitive dozagruzkoy capacity. Today we have about 25% are not employed capacity.

At the second stage the economy should grow by increasing productivity, investment, expansion of non-oil exports. At this stage it will be the strengthening of the ruble exchange rate in line with economic growth, regardless of the prices of raw materials. Development should ensure that increasing investment in fixed assets and human capital. This can be called the period of entering the high growth rates.

The third stage - a sustainable development, which should ensure a balanced mix of developing the internal market by improving the quality characteristics of the standard of living and dynamic development of non-commodity high-tech exports, opening new markets innovative products and services. At this stage, it will increase the share of Russia in the world economy through the development of innovative global markets and managing global production chains.

It is proposed to ensure the normal functioning of the economy in terms of nominal convergence rate parameters and PPP. That is, if it is in dollars have a hamburger costs three times cheaper than in New York, then in the normal functioning of the economy and the cost in dollars and in rubles should be almost the same. Now this is not because there is a big difference between the nominal rate and the rate at purchasing power parity.

"For the first time we are holding the forum in wintertime. It has been only six months since the previous one was held, but, nevertheless, evidence shows that this decision was justified. The number of participants was up 8% [compared to the previous forum]. Early estimates of the value (of the deals concluded) put the figure at 200 billion rubles, but those are intermediate results," Kozak said.

He described the forum as a success, with about 600 companies taking part, including 80 from abroad.

"There is great interest toward the forum," he said.

The Russian Investment Forum in Sochi opened on Monday and concluded Tuesday. The forum’s program focused on three themes: "New regional policy - opportunities for development; improving business performance; and successfully achieving projects in life."

"Privatization will take its course. It is not connected with the sanctions, it depends on market conditions: we will have to sell what is profitable to sell," Medvedev said.

The Prime Minister said that privatization as such is not the purpose for the government.

"Privatization is a tool, it is not some special goal that we pursue. It is a tool to replenish the budget, as it was done in the case of the sale of shares of Rosneft and Alrosa, or to find a more effective owner, when we believe that the participation of a private investor will bring the best results," the head of the government said.

http://tass.com/politics/933314

"I have spoken about the sanctions more than once: we should be prepared to live under sanctions indefinitely long," he said in an interview with the Rossiya-1 television channel.

"Just look at what our friends overseas and in Europe are doing! They are enshrining these sanctions in law, they are codifying them. They are initiative a great deal of laws on top of various executive orders [U.S. former President Barack] Obama has issued. They are trying to pass laws to formalize these sanctions as standing, like the Jackson-Vanik amendment," he said.

So, in his words, the sanctions are very much unlikely to be lifted soon. "In this sense, we cannot count on their indulgence," he said. "And we don’t need it because, as life has shown, we can develop rather well even in conditions of the sanctions. And what we have achieved in industry and in agriculture was achieved not thanks to but despite as we had to restructure our work."

Austin wrote:kvs and others read the interview in full its interesting

Boris Titov: implementation of the "Growth Strategy" will allow Russia by 2035 to double the GDP

http://www.interfax.ru/interview/550606

Business Ombudsman spoke about the essence of the documents and the discrepancy with the proposals of the Center for Strategic Research

- The main targets of the program?

- The essence of the strategy is that in the present circumstances only the market, private business, competition could save the Russian economy.

The main indicator - GDP growth. We believe that in 2019 the growth should be 3.5 - 5%. Growth of 4-6% should remain until 2025. Then he may decline slightly by 2035 to 3-3.5%.

The consistent increase in the rate of growth and improvement of its quality will double the GDP by 2035.

The first stage of "Growth Strategy," (2017 - 2019 gg) we conventionally call "New Industrialization", whose mission - to restore economic growth. We must reach 30 thousand. Dollars of GDP per capita at purchasing power parity (PPP).

The second stage - "Innovative Economy" (2020- 2025 years), involves access to high speed and quality of economic growth and should provide 40 thousand dollars per capita at PPP.

The third stage - "Knowledge Economy" (2026 - 2035 years) involves ensuring sustainable development of the country with access to 45 thousand dollars per capita at PPP..

We believe that each of these stages has its own economic characteristics.

The first stage - is the use of domestic demand as the main driver of growth - import substitution and the use of traditional exports. There should be moderately low exchange rate of the ruble. That is, we have to support import substitution, to stimulate domestic producers. Thus the development should be provided primarily existing competitive dozagruzkoy capacity. Today we have about 25% are not employed capacity.

At the second stage the economy should grow by increasing productivity, investment, expansion of non-oil exports. At this stage it will be the strengthening of the ruble exchange rate in line with economic growth, regardless of the prices of raw materials. Development should ensure that increasing investment in fixed assets and human capital. This can be called the period of entering the high growth rates.

The third stage - a sustainable development, which should ensure a balanced mix of developing the internal market by improving the quality characteristics of the standard of living and dynamic development of non-commodity high-tech exports, opening new markets innovative products and services. At this stage, it will increase the share of Russia in the world economy through the development of innovative global markets and managing global production chains.

It is proposed to ensure the normal functioning of the economy in terms of nominal convergence rate parameters and PPP. That is, if it is in dollars have a hamburger costs three times cheaper than in New York, then in the normal functioning of the economy and the cost in dollars and in rubles should be almost the same. Now this is not because there is a big difference between the nominal rate and the rate at purchasing power parity.

Austin wrote:Sergei Glazyev provides seven scenarios for Russia

https://www.gazeta.ru/business/2017/02/25/10543481.shtml

miketheterrible wrote:Russia doesn't trust anyone. But reason for US being cautious in over criticising China is Chinas investments and ownership in US companies and US debt China owns. So they aren't buddy buddy but they will want to keep status quo until China finds an alternative to US for all its economy. And it sees Russia as part of that. China won't throw Russia around or treat it poorly because it can't. Russia has plenty of others to operate with and hence why it isn't in a hurry to do anything.

kvs wrote:

Austin wrote:Inflation is getting controlled artifically by following a conservative economic policy and keeping interest rates high at 10 %.

They probably want to get their inflation rate right before they target interest rate , which I dont think so will go down 50 basis point or 0.5 % as and when CBR thinks it should go , It will be a slow slide for sure with 0.5 % as basis for slide.

This is really bad for business class who cant afford loan from Bank at such high interest rates and them getting loan from abroad is blocked due to sanctions.  This hurts the production sector of economy badly and does no good to it.

CBR is following likely Putin & Co mandate to keep inflation down and keep savers class happy with high interest rate as they will earn more by Saving for an Election Year this works well with the voter screw the business class for now

I think the business class will see better interest rate post elections certainly better than the 10 % post 2018 election , how much better time will tell but it will be a slow glide to low interest rate not a hard landing , CBR is superconservative on these matters.

This year in 2017 I am expecting interest rate to go 0.5 % and if lucky 1 % which I doubt , I would bet on 9.5 % by EOY.

A good interest rate is 4-5 % that takes care of need of savers and business class  but to get to that figure we will have to way another 5-6 years.

The Shadow Stats webpage does a good job demonstrating that the actual US consumer inflation rate over most of the last 30 years has been 6%
and not the faked up 2% (e.g. hedonics adjustments).   The inflation methodology used in Russia is closer that used in the USA during the 1980s before
Clinton's manipulated approach took over.   So 6% was normal already and for Russia simply spectacular since it still has so many price and structural
adjustments in progress (by comparison the USA is steady state).  

There is little value from savers getting "high" deposit rates if companies can't finance their operations.   It used to be that banks converted savings
into lending.  Here we have a constriction on lending regardless of savings.