Manual control

Economists on Putin's report to the Duma

Vremya Novostey correspondents Vera SITNINA, Irina SKLYAROVA and Yulia MIRONOVA decided to ask economists whether the Prime Minister's report to the Duma shows the logic of the government's future actions and what can be expected from the implementation of the anti-crisis plan.

“The main thing is not to inject too much money through budget channels”

Anton STRUCHENEVSKY, senior economist at the investment company Troika Dialog:

- It is very good that the government sets itself such large-scale goals as reducing inflation and the budget deficit, and improving social policy. I believe that there are opportunities for their implementation. There are real opportunities to increase social spending while reducing the budget deficit. There is a lot of room for creativity in making government spending more efficient. A simple example: our peak payments always occur in December.

I was very pleased that the Prime Minister talks about the need to fight inflation, sets goals for reducing it in the next three years and promises to lower the refinancing rate provided that inflation decreases. I believe that these are absolutely realistic tasks. Moreover, an inflation rate of 8% can be achieved next year. This is an extremely important task. Previously, high inflation did not have a negative impact on macroeconomic policy, at least in the short term. It did not weaken the ruble exchange rate, because the inflow of currency was significantly higher than the outflow. But now the situation has changed dramatically. We have moved from a policy of targeting the exchange rate to a free floating regime. And inflation becomes a key indicator that can destabilize the situation. A strengthening of the ruble leads to an increase in imports, and an increase in imports leads to a decrease in the trade balance, which necessitates a new devaluation. But the government is acting very carefully. I very much appreciate the macroeconomic policies being implemented this year. Now the main thing is not to inject too much money through budget channels.

“A deficit-free budget is possible as early as next year”

Vladimir TIKHOMIROV, chief economist at Uralsib:

-- The government will take a more cautious approach to budget spending, not handing out money left and right, but at the same time helping important enterprises in order to prevent the growth of social tension. In fact, this means manual control of the economy. But the government did not hide this before.

The announced continuation of pension and tariff reforms is very important. This demonstrates the government's readiness to continue them despite difficult times of crisis. But if we don’t do this, in five to ten years, half of the federal budget will go to cover the Pension Fund deficit. The situation is similar with the investment programs of natural monopolies. But, on the other hand, the increase in tariffs of natural monopolies does not allow us to talk about a rapid decline in inflation. I am cautious about the prospects of reaching 8% in three years. The last significant tariff increase is planned for 2011. Thus, only from 2012 it will be possible to talk about a downward trend in inflation.

But reducing the budget deficit, in my opinion, can be achieved even faster than the government promises. A good resource is reducing government spending on administrative personnel. If oil costs above $50 per barrel and the economy begins to gradually emerge from the crisis, a deficit-free budget is possible as early as next year. I think that the government is taking a conservative position, fearing that the crisis may drag on.

"Social support cannot be called an anti-crisis measure"

Igor NIKOLAEV, head of the strategic analysis department at FBK:

— There were no unexpected statements in Putin’s speech; everything voiced was within the framework of the previously announced program. A trillion rubles are being allocated to improve the stability of the financial system. In essence, this is a continuation of the unsystematic, chaotic fight against the crisis. The fact that the fight against the crisis through pumping money into banks was unsystematic from the very beginning is proven by the current disappointing economic indicators. Banks already have indigestion of money, they do not issue loans, but trillions are still going there.

The emphasis is on the fact that the state will fulfill social expenditures in full and will steadily increase them, but social support cannot be called an anti-crisis measure. This is the main contradiction of the prime minister's speech. Social protection measures will soften the consequences of the crisis for the population, but will not revive the economic engine, and macroeconomic indicators will not stop falling. These are rather pro-crisis rather than anti-crisis measures. Inflated social obligations are taken on, but what if suddenly in a year or two the budget indicators are such that the fulfillment of obligations will be in question? It will no longer be possible to reduce them.

"We have not heard how business activity will recover"

Elena MATROSOVA, head of the center for macroeconomic research, BDO Unicon:

— Despite the apparent contradiction of the Prime Minister’s speech, there is logic in the structure of his speech. Putin now faces two tasks: fighting the crisis and working within the framework of a development strategy. He is the prime minister and cannot focus only on the crisis when speaking before the Duma. Hence the discrepancy in topics. Putin touched on many specific issues: from freezing tariffs to executive discipline. At the same time, speaking about economic trends and ways to counter the global crisis, the emphasis should have been on tools for restoring business activity. We didn't hear this.

There were also no answers to pressing questions. Why, for example, are the ruble and Russian stock indices growing against the backdrop of a deepening crisis? What to do with overdue bank and corporate debt? Will measures be taken to support demand? Finally, what will the government do when it becomes clear that tax revenues are being collected in much less volume than planned? After all, most enterprises today declare that they are operating at a loss.

"There are reserves for modernizing the tax system"

Evgeniy GONTMAKHER, scientific director of the Center for Social Research and Innovation, Institute of Economics of the Russian Academy of Sciences:

- Vladimir Putin did what was expected of him - basically he promised money. For example, he once again confirmed that there will be a valorization (organized increase. - Ed. ) of pensions ( earned before 1991 - Ed. ) . The fact that the unified social tax will not be increased from 2010 is correct, but this decision was also expected from the government. Just there was no need to make an insufficiently thought-out and calculated decision back in October of last year. Even then it was obvious that it could not be realized in the current socio-economic conditions.

Thanks to the Prime Minister for defending the 13 percent income tax rate, this measure played a positive role. But there are still reserves for further modernization of the tax system. In particular, it is possible to exempt citizens with incomes below the subsistence level from taxes - this will help revive domestic demand.