Russian Regions in January-July 2019: Mix of Growth, Stagnation and Slump

Natalia V. Zubarevich – Main Researcher of Russian Presidential Academy of National Economy and Public Administration, Doctor of Geographic Sciences, Professor (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

In January-July 2019, amid the upturn in industry driven mainly by resource-producing territories and sectors and weak growth in consumption the most serious problems were still the level of households’ incomes and the volume of investments which fell in more than a half of regions. The housing development was getting out of the crisis, primarily, in large metropolitan areas and in the south of the country, while the recession continued in the Far East. Most regions saw growth in their budget revenues owing to an increase in profit tax revenues and transfers, which made it feasible to raise expenditures on the economy and social services. Advanced growth in expenditures on housing and public utilities was underpinned mainly by Moscow which spent a huge amount of funds on urban land improvement. The inequality between regions kept growing, particularly, as regards investments, wages and budget revenues.

Key words: RF regions, socio-economic situation of regions, regional budgets.

Industry in September 2019: Demand Сonstancy as an Obstacle to Growth

Sergey V. Tsukhlo – Head of Business Surveys Department of the Gaidar Institute, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

A stable demand movement pattern makes it possible, for industry, to secure control over stocks of finished goods and raw materials. At the same time, the production growth rate is still at a near-zero level, and there are no preconditions for any significant output increase in the foreseeable future. The reluctance of enterprises to create new jobs has hit its historic high of the entire monitoring period since 1993. The investment plan optimism index continues to slide after its rise in 2017.

Key words: Russian industry, demand, output, employment, finished goods inventory, industrial lending, personal, investments, actual changes and expectations.

Regional Budgets for January-July 2019: Growth of Revenues Shifts into Low Gear

Alexander N. Deryugin – Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration; Researcher of the Gaidar Institute (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Fast increase of regional consolidated budgets amid low economic growth rates could stay for long. And such turning points was not slow in coming: following 22.6% growth as of first four months of 2019, increase of tax and non-tax regional revenues registered in May-July came to barely 1.4% and most likely will remain low till the end of the year. Despite the shift of priorities in the state budgetary policy the structure of the regional budgets expenditures for the first 7 months of 2019 does not practically change from the corresponding period of 2017. In its turn, deceleration of regional growth rates through the year-end will exercise downward pressure on the growth of their expenditure obligations.

Solid performance of the regional budgets balance facilitated further contraction of the average debt burden of RF subjects which constituted 21.5% of the regional revenues volume returning to the 2009–2012 level. Nevertheless, average and low income regions report twice as high debt burden.

Key words: consolidated budgets revenues, consolidated budgets expenditures, regional budgets, corporate profits tax, personal income tax, public debt.

Trade Wars: First Effects

Alexander Yu. Knobel – Head of Foreign Trade Department of the Gaidar Institute; Director of Center for Foreign Trade Department of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Nikita S. Pyzhikov – Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The trade wars that have been waged by the USA since early 2017 are an upshot of the structural problems accumulated inside the global trade and economic system. Firstly, the benefits of globalization are distributed unevenly between the developed and developing countries, and between skilled and unskilled workforces; and inequality in the developed countries is broadening. Secondly, the multilateral trade system has been functioning in accordance with the rules established by the developed countries towards the end of the 20th century, while the positions of the developing countries have significantly strengthened since then. Thirdly, the character of regional economic integration has altered: the process of expansion and increasing complexity of trade treaties has given way to active development of bilateral agreements.

The effect of the ongoing processes on Russia has so far been rather weak. However, later on is can be expected that the negative effects, in particular on Russian metallurgy, might become stronger.

Key words: trade wars, world trade and economic system, globalization, economic integration, developed countries, developing countries.

Life Expectancy and Mortality Rate in 2018

Ramilya R. Khasanova – Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

According to aggregated data for 2018, positive tendencies have been observed with regard to life expectancy rates as well as to reduction of infant mortality. However, growth of diseased along decrease of births exacerbates natural decline in the population. A slight decrease in the male mortality rate aged 16–59 is accompanied by growth of this rate in females (16–54). Reduction of mortality from diseases of the circulatory system, neoplasms occurs simultaneously with an increase of mortality from diseases of the digestive system, endocrine system, eating disorders and metabolic disorders, nervous system, mental disorders and behavior disorders.

Key words: life expectancy, mortality rate, infant mortality rate, number of newborns, natural population decline, causes of death.

Exchange Rate Channel of Monetary Transmission Mechanism under Inflation Targeting

Alina M. Grebenkina – Junior Researcher of the Russian Presidential Academy of National Economy and Public Administration (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The article specifies the concept of the exchange rate channel of monetary transmission mechanism considering the effects caused by global financial and commodity markets and explains its peculiarity in countries with inflation targeting regime of monetary policy. Based on case-study approach the article provides such features as significant exogeneity of the exchange rate channel; heterogeneous pass-through effect of the exchange rate; functioning as an instrument of non-conventional monetary policy (in order to overcome stagnation and liquidity trap); distinct incentive of particular countries (primarily financial centers, commodity exporters and manufacturing exporters) to manage exchange rate expectations, particularly to cool expectations of excessive currency appreciation.

Key words: monetary transmisson mechanism, exchange rate channel, inflation targeting, cross-country analysis.

Government Supervision and Control Reform from the Public Viewpoint

Vladimir N. Yuzhakov – Director of Center for Public Management Technologies of the Russian Presidential Academy of National Economy and Public Administration, Doctor of Philosophical Sciences, Professor (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Elena I. Dobrolyubova – Leading Researcher of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Andrey N. Pokida – Director of Center for Social and Political Monitoring of the Russian Presidential Academy of National Economy and Public Administration, Сandidate of Sociological Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Natalia V. Zybunovskaya – Researcher of the Russian Presidential Academy of National Economy and Public Administration (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Improving inspection and regulatory enforcement activities is a key measure for enhancing business climate outlined in the Main Directions for RF Government Activity till 2024. It is expected that control and enforcement reform would enhance the protection of citizens’ lawful rights and interests on the one hand and reduce administrative burden on businesses – on the other.

The results of the monitoring conducted by RANEPA in 2019 suggest that despite the public perceptions of safety from the core risks has improved since 2018, such improvement has weak correlation with the inspection and regulatory enforcement reform. On the contrary, the citizens tend to rely on their own actions and the good will of producers and suppliers while the role of control and inspection bodies in ensuring public safety is diminishing. Decreased expectations from control and inspection bodies is also a result of low performance of such bodies: one in three requests to control and inspection bodies results in formal answers rather than real measures aimed at preventing, eliminating, and reimbursing the damage caused.

Key words: inspection and regulatory enforcement activities, control and inspection bodies, evaluation, effectiveness, sociological survey, efficiency.

Price Uncertainty Index of Russian-Exported Commodities in H1 2019

Kristina V. Nesterova – Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration (Moscow, Russia). E-mail This email address is being protected from spambots. You need JavaScript enabled to view it.

Dynamics of the index of world prices uncertainty on commodities exported by Russia in H1 2019 stabilized at the 2018-end level following its sharp increase in H2 2018, which marks the retention of the downward pressure of the world prices uncertainty on commodities exports on economic growth.

Key words: export, commodities, price index, uncertainty.

Features of Price Setting Behavior in the Moscow E-Commerce Market

Alexey S. Evseev – Junior Researcher of the Russian Presidential Academy of National Economy and Public Administration (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

This paper studies features of price setting behavior in the Moscow e-commerce market. We find that the median time between price changes of 38 days. This result is comparable to the findings of a similar study for the US e-commerce market (39.1 days), but higher than in Italy (29.8 days) or France (23.6 days). We also find that the frequency of price changes differs dramatically across goods as well as among retailers. Around 6.4% of regular price changes are smaller than 1% in absolute value, which indicates support for the concept of menu costs.

Key words: price setting, e-commerce market, menu costs, price changes.

Federal Budget in H1 2019: VAT Share in Tax Revenues up

Tatyana V. Tischenko – Senior Researcher of the Gaidar Institute; Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Sergey G. Belev – Head of Budget Policy Department of the Gaidar Institute; Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The federal budget revenues by H1 2019-end moved up by 0.4 p.p. of GDP against the same period of the previous year, first of all, due to increased VAT rate from 18 to 20%. Simultaneously, expenditures have contracted by 0.9 p.p. of GDP. As a result, the federal budget was executed with surplus amounting to 3.3% of GDP. However, these results do not give occasion for optimism especially from the point of view of risks for the revenues part of the budget. For example, oil prices can go down, excises are not the significant source of the budget replenishment and the VAT rate increase has adversely affected domestic consumption and imports.

One should expect significant growth of expenditure in H2 as long as cash execution especially of certain national projects was lagging behind during H1. Consequently, the federal budget surplus can decline.

Key words: federal budget, taxes, revenues, oil and gas revenues, non-oil and gas revenues, expenditures, state foreign debt.

Survey of Current Business (July-October 2019)

Sergey P. Aukutsionek – Head of Center for Transition Economy Studies, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Andrey S. Yegorov – Researcher of the Center for Transition Economy Studies, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Inessa A. Bachirova – Senior Researcher of the Center for Transition Economy Studies, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Stanislav V. Belyakov – Researcher of the Center for Transition Economy Studies, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

In July 2019, the share of enterprises not purchasing equipment for 2 or more consecutive months decreased to 31% – the lowest level in the past year and a half. As for other indicators, statistics for July turned out to be more or less neutral, which cannot be said about expectations for October 2019. Besides the diffusion index of expected in three months changes of price for purchased products, which added 7 percentage points (p.p.), all the other expectations became more pessimistic. Among the others, most noticeably declined the diffusion index of the expected in three-month orders (-15 pp), output and employment (-11 pp each).

Key words: Russia, industry, industrial enterprises, price level, wages, employment, output, investment, indebtedness to banks, order-book level, stocks of finished products, capacity utilization rate, financial situation.