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Development of Regions in January-November 2019: Inertia Retains

Natalia V. Zubarevich – Main Researcher of the 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.

The regions over January-November 2019 demonstrated stunted social and economic development. Except renewal in the residential construction sector following the recession the fastest rate of development was posted in the largest Moscow agglomeration. Amid the weak wage growth seen in the vast majority of the regions the low level of unemployment retains. The budgetary situation is favorable, however the revenues growth of the budgets of many regions in large measure is secured by the growth of transfers. The need to implement President’s Executive Orders was reflected in the outstripping growth of budgetary expenditure on national economy and provision of public amenities.

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

Survey of Current Business (December 2019 - March 2020)

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 – Senior 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.

Tatyana V. Serzhantova – 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 December 2019, the diffusion index of stocks of finished products reached the lowest value for 10 years (34). It was lower only three times: in 1998, 1999 and 2009. Stocks of finished products (relative to the normal monthly level = 100) also decreased significantly, reaching a minimum for 2.5 years (77%).

Among the factors that constrain production, compared with a quarter ago data, the share of enterprises indicating a lack of demand for manufactured products has decreased significantly – by 19 percentage points and reached 49%. The share of enterprises that indicated high taxes increased by the same 19 percentage points and amounted to 31%. The rating of the factor of high prices for raw materials, materials, and semi-finished products also increased: adding 11 points, it reached 29%.

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, production restrictive factors.

Underutilization of Labor Resources: Growth of Potential Workforce

Victor Yu. Lyashok – Senior 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.

In the course of four recent years the unemployment level in the Russian Federation is on the decline. However, application of alternative criteria for the estimation of underutilized labor resources demonstrate somewhat different dynamics. In 2019, we observed growth of potential workforce number including those who believe it to be impossible for them to find a job.

The article was written on the basis of the RANEPA state assignment research programme.

Russian Industrial Sector in January 2020

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.

Downward trend in demand curbs growth of industrial output. At the same time, plans and projections of enterprises still remain optimistic. In the context of personnel shortage businesses put out considerable efforts aimed at keeping their workers and plan to increase employment.

Key words: Russian industry, index of industry adaptation, stock of finished goods, stock of raw materials, stock of materials, demand, employees supply, financial/economic situation.

Digitalization of the State: Traps and Perspectives

Elena I. Dobrolyubova – Leading 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.

In contrast to the ‘digitization’ and transfer of ‘analog’ administrative procedures into the electronic interaction format, digital transformation involves substantial changes in public administration processes that affect all stages of the administrative cycle, as well as the functions and powers of public authorities.

The purpose of these changes is to fundamentally improve management quality and the performance and efficiency of government agencies, and to achieve a higher level of elaboration of and substantiation for legislative, regulatory and project-based decision-making. An analysis of the Federal Project Digital Public Administration demonstrates that its system of goals, indicators and results does not always make it possible to assess the extent to which the final effects mentioned above can be achieved.

Key words: digital economy, digital transformation, federal project «Digital public administration».

Industrial Production Dynamics in Q4 2019

Andrey S. Kaukin – Head of Department for System Analysis of Sectoral Markets of the Russian Presidential Academy of National Economy and Public Administration; Head of Sectoral Markets and Infrastructure Department of the Gaidar Institute, Candidate of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Eugenia M. Miller – Senior 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.

As seen by the period-end results of Q4 2019, the manufacturing and extractive sectors of the Russian economy once again displayed a near-zero growth, while production of electric energy, gas and water declined. Growth slowdown in the extractive sector occurred as a result of the implementation of the OPEC+ deal concerning daily oil production cuts, coupled with shrinking demand for Russia’s natural gas and coal exports. Growth in the manufacturing sector was displayed by the food industry, chemical production, and metallurgy.

Key words: industry, economic sectors, mining industry and manufacturing, Rosstat.

Determinants of Financial Development

Yury A. Danilov – 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.

Danil A. Pivovarov – 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.

Igor S. Davydov – Junior 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.

The article discusses the impact of factors (determinants) of financial development on the level of financial development described by the Financial Development Index. We have grouped the various determinants of financial development used in previous studies into groups. After that, within each group, determinants were identified that have the most significant impact on the level of financial development. In relation to Russia, we highlight the lag in the quality characteristics of investment and financial regulation, which, in our opinion, is the reason for the lag in Russia in the field of financial development in general, observed after 2009.

Key words: financial development, determinants of financial development, financial sector, investor protection level, sociocultural factors, Financial development index, financial regulation, classification of determinants.

On the Prospects for the Development of the Eurasian Economic Union

Pavel A. Kadochnikov – Leading Researcher 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.

The paper considers possible directions for the development of the Eurasian Economic Union (EAEU) in the context of modern trends in international trade related to the changed balance of developed and developing countries, dynamics of barriers to trade, global value chains development and enhancement of the digital trade. The directions include the further removal of barriers and accelerated implementation of roadmaps for the common EAEU markets, increasing the effectiveness of the EAEU institutional bodies and the implementation of joint projects and promising areas of EAEU activities, including in the digital economy.

Key words: International trade, the Eurasian Economic Union (EAEU), regional economic integration, tariff and non-tariff barriers, common EAEU markets.

Banking Sector Resources in 2019

Sergey A. Zubov – Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration, Сandidate of Economic Sciences, Associate Professor (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The provision of assets by the banking sector in 2019 remained rather squared. Given the fact that economic subjects kept confidence in the banking sector, the lending institutions went on a resource base binge by using traditional tools – taking household and corporate funds on deposits. However, growth rates declined somewhat compared to the previous year.

Dynamics of the interest rates on retail deposits were mainly due to the inflation rate and the decisions on the monetary policy: after mid-year, a downward trend set up. Ruble appreciation and strengthening have contributed to the shrinkage of the currency liability entries in accounts which in its turn decreased exposure of the financial system against external shocks.

Key words: Russian banking sector, banking sector resources, deposits of the population, interest rates on deposits of individuals, deposits of corporate clients, debt obligations of banks.

Balance of Payments in 2019

Alexandra V. Bozhechkova – Head of Monetary Policy Department of the Gaidar Institute; Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration, Сandidate of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

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). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Pavel V. Trunin – Head of Center for Macroeconomics and Finance of the Gaidar Institute; Leading Researcher of the Russian Presidential Academy of National Economy and Public Administration, Doctor of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

In 2019, Russia’s trade surplus shrank significantly as result of a declining value volume of exports which, in its turn, was pushed down by sliding prices of oil and increasing imports. Meanwhile, net capital outflow that had been observed in 2018 gave way to net capital inflow, to the value of $ f 1.8bn, secured by an increase in the public sector’s foreign liabilities and a slower-than-in-2018 rate of growth displayed by those of the private sector. International reserves by the year end surged above $ 554bn, thus hitting their record high of the entire period after the global financial crisis. Due to the application of the budgetary rule (which made the ruble less dependent on the oil price movement pattern) coupled with the financial account surplus, the ruble’s exchange rate against foreign currencies became stronger.

Key words: balance of payments, export, import, current account, rate of Ruble exchange, capital outflows, Bank of Russia.

Financial Performance of the Banking Sector in 2019

Sergey A. Zubov – Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration, Сandidate of Economic Sciences, Associate Professor (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Return on assets of the Russian banks at 2019-end has significantly increased despite a slide in bank margin and slowdown of lending growth rates. This fact was due to both credit risk mitigation and putting in operation of a new procedure for loan loss accounting. In 2019 as a whole, bank assets’ growth rates have decreased.

Key words: Russian banking sector, banking sector profitability, bank profitability, reserve requirements, capital adequacy, bank loans, past-due debt, fee and commission income.

Federal Budget Execution for 2019: Key Research Insights

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.

Ilya А. Sokolov – Head of Budget Policy Research Department of the Russian Presidential Academy of National Economy and Public Administration; Director of Institute of Macroeconomic Research, Russian Foreign Trade Academy of the Ministry for the Economic Development of the Russian Federation, Candidate of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

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.

The federal budget execution for 2019 compared to the previous year is marked by a reduction of the share of oil and gas revenues which shrank to 40.9% against 46.3% in 2018. At the same time, the total federal budget revenues have decreased insignificantly (down 0.2 pp of GDP) mainly due to considerable growth of proceeds from VAT (up 0.8 pp of GDP) on the back of VAT rate rise from 18 to 20%.

Increase of the federal budget expenditures against last year came to 0.6 pp. of GDP or around Rb 1.5 trillion in nominal terms due to the implementation of the national projects. Further growth of respective financing on the back of falling federal budget revenues raises the risk of its imbalance.

NWF (National Wealth Fund) markedly increased in 2019 (up to 7.1% of GDP against 3.9% of GDP a year earlier) resulting from crediting of accumulated in 2018 additional oil and gas funds to NWF accounts. Although liquidity available in NWF will markedly contract on the back of acquisition of the Sberbank shares, it will be sufficient for the implementation of all state obligations even amid unfavorable external economic conditions in medium-term perspective.

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

Employment Promotion in Rural Areas: How Can the State Program Be Properly Adjusted

Natalia I. Shagayda – Director of Center for Agro-Food Policy of the Russian Presidential Academy of National Economy and Public Administration; Head of Agricultural Policy Department of the Gaidar Institute, Doctor of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Alexandra A. Potapova – 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 State is implementing the policy of labor market (human resource) development in rural areas in the framework of the State Program for Comprehensive Development of Rural Areas (hereinafter – State Program). It is expected that the allocation of state subsidies designed to cover the costs of employers incurred by them in the course of training their personnel to acquire the professions needed by the agrarian sector will conduce to the achievement of the State Program’s target – an increase, by the year 2025, of the employment rate of able-bodied rural residents. However, an analysis of the State Program’s provisions has raised doubts concerning the actual possibility of achieving the set targets. In fact, the draft of the State Program’s latest version is capable only of partially improving the existing mechanisms.

Key words: agriculture, rural population, State program for comprehensive, development of rural areas, apprenticeship contract.