/ world today news/ On May 12, Russian President Vladimir Putin held a meeting on economic issues, during which he outlined the current situation in our country. But in the context of the recent holiday date, which today has become even more relevant than before, it began with the victory in the Great Patriotic War, achieved, among other things, thanks to the economic power of the country “which then opposed an industrial potential not only of Germany, but also of almost all of Europe, which the fascists enslaved.”
The head of state noted that the measures to ensure the sustainable development of the economy are now implemented in complex external conditions: in the face of a difficult global situation and sanctions by Western countries, which provoke a crisis in the world economy.
“Their authors, driven by short-sighted, inflated political ambitions, Russophobia, hit above all their own national interests, their own economies and the well-being of their citizens. We see this above all in the sharp increase in inflation in Europe. In some countries, it has already approached 20 percent per year, and in the Eurozone as a whole, commodity prices have increased by more than eleven percent,” stressed Vladimir Putin, noting that the “continued mania for sanctions” will inevitably lead to “the most complex and overwhelming consequences for the EU’ and for the world’s poorest nations, which are already at risk of starvation.
Russia, according to the president, is confidently dealing with external challenges. The country is clearly not at risk of starvation: experts are already predicting an unprecedented, even record grain harvest – about 130 million tons, including 87 million tons of wheat alone.
“Inflation is gradually slowing down: in the last month its rate has decreased several times compared to March, the weekly price increase has already dropped to 0.1 percent. This is already close to the weekly growth rate, which is in line with the Bank of Russia’s inflation target,” Vladimir Putin added.
“Inflation has slowed down significantly, and indeed, Vladimir Vladimirovich, as you said, last week it decreased to 6.4 percent on an annual basis, that is, like before this whole situation,” commented the Russian Minister of Economic Development Maxim Reshetnikov, who presented a report at the meeting , which actually argues the president’s theses.
Annual inflation in the first week of May 2022 stood at 17.7%, slowing to 0.1% per week, while in March and the first half of April growth was 2% per week, said the head of the analytical department of ” A-Markets” Artyom Deev. He points to the fact that this is facilitated by the transition from a wave of rapid demand to economical consumer behavior.
What is needed for economic warfare
Enumerating signs of the stability of the Russian economy, Vladimir Putin pointed to the record positive balance against which the ruble is strengthening.
“This year has demonstrated perhaps the best dynamics among all currencies in the world,” the president noted.
Indeed, according to the results of the first quarter of 2022, the trade surplus more than doubled to $58.2 billion.
This turns out to be a generally favorable reaction of the economic organism to a combination of conflicting factors. “As indicated by the Central Bank of the Russian Federation, imports from European countries have decreased by almost 40%, and from China – by more than 25%,” explains Artyom Deev. The increase in the price of exported raw materials also played a significant role in the growth of the positive balance, adds Dr. Oksana Savchina.
“In 2022, imports are expected to decline due to lower demand, economic sanctions and logistical problems. Exports will also decrease, but since more than 60% of its structure falls on energy resources, with a decrease in supplies, prices will rise, and this will slightly compensate for financial losses,” notes Savchina.
This forecast is also confirmed by Alexander Losev, general director of “Sputnik Capital Management”. “A long economic and political confrontation with the West is ahead. Economic warfare is also war. And to wage war, as the successful Renaissance commander Gian Giacomo Trivulzio said, three things are needed: first, money, second, money and, third, money,” says Losev, “Because in the largest Russian companies and the public sector work a significant part of the population, then the decisions taken this year by the government and the Bank of Russia will determine the prospects for our country for years to come and will support the process of reindustrialization and transformation of the Russian economy and guarantee GDP growth rates of the order of 5 -10% in one year or, if they are insufficiently effective, they will demonstrate lagging behind the world economy”.
Experts suggest
According to the results of the first four months of the year, the surplus of the consolidated budget amounted to 2.7 trillion rubles, which was also noted at the meeting on economic issues.
As Oksana Savchina explains, the main driver of such strong growth is additional oil and gas profits combined with the end of the budget rule.
“The more threats from the West to reject Russian energy carriers, the more the prices rise and the more profits the companies get. At the same time, the Europeans quickly increased the volume of purchases of raw materials,” adds Artyom Deev.
Of course, the expression “budget surplus” sounds much more optimistic than “deficit”. After all, a “deficit” means that the government does not have enough funds and will have to go into debt to meet all of its obligations. But the opposite sign carries certain risks.
“A budget surplus, although positive, is still an imbalance because a surplus means that money taken out of the economy in the form of taxes and fees does not immediately return to the economy, does not work to increase GDP, but accumulates in accounts of the Ministry of Finance”, explains the general director of “Sputnik Capital Management”.
According to him, it is necessary to abandon the policy of austerity and start stimulating the economy by increasing government spending.
“We urgently need to launch investment projects and programs for import substitution and expansion of production in Russia, reduce the tax burden and subsidize interest on bank loans so that citizens have additional funds and opportunities at their disposal, for example, to buy local consumer goods and mortgage properties while businesses have funds for investment and expansion’, lists possible measures to support business development, the economy as a whole and improve living standards. He notes that, for example, subsidies to producers help increase production, and reducing the tax burden on the population increases its ability to pay, which, when applied simultaneously, creates the necessary conditions for GDP growth.
Use the income not outside, but inside, for the benefit and for the future of Russia
As for business support measures, according to Maxim Reshetnikov, it must deal with both the disruption of supply chains and the reconfiguration of production. However, it often comes down to money.
There is work here in all areas: large companies are supported through an extended program of guarantee support for lending to enterprises. As for small and medium-sized businesses, there are four programs for them. One of them is implemented directly by the Central Bank: it has already granted loans for 130 billion rubles, in addition, loans for another 190 billion have been restructured. Under the investment lending program, which is implemented jointly by the Bank of Russia and SMEs, 66 billion rubles have already been issued in two months – a third of everything you planned for the year. Another 50 billion rubles were distributed under the “umbrella guarantees” of the Corporation.
“It is very important that these programs ultimately support investment processes in small businesses. For example, a company from Chelyabinsk for the production of small parts updated and expanded its fleet of equipment, machines for the manufacture of springs for furniture, that is, such small projects in the field of import substitution that allow us to “distribute” by chains, “said Maxim Reshetnikov.
Vladimir Putin himself, among the support measures, also noted the provision of insurance premium deferrals for a number of enterprises that employ a total of 52 million people.
“Payments of insurance premiums for these organizations will be postponed, as we agreed, for one year – they will start from May 2023. In total, businesses will be able to maintain about 1.1 trillion rubles in circulation. In fact, these funds will turn into an annual interest-free loan from the state. In addition, companies in the manufacturing sector will be allowed to defer insurance premiums for the third quarter of this year, which is about another half a trillion rubles,” the president said.
According to experts, the delay in this situation is a real measure to support business, since these costs make up a large part of wages. And what will happen in a year when the debts will have to be paid back? According to Artyom Deev, there may be several options: payment in installments or even a moratorium. But maybe they won’t be needed.
“Fiscal measures such as tax reductions, postponement of social security contributions and direct support measures for entire categories of the population not only leave more funds available to economic entities, but also have a multiplier effect, as the subsequent growth of the economy leads to an increase in the tax base, which also means future revenues in the budget”, explains Alexander Losev, who believes that if the business effectively manages the received fiscal loans this year, next year it will be fully able to return everything to the state.
“But the practice of stimulating the economy should not be limited to this year. The reality is that it will no longer be possible to accumulate additional budget revenues on foreign currency accounts, as it was many years and ended on February 24, 2022, they will have to be used within Russia, for the benefit of Russia and for the future of Russia,” the expert sums up.
Translation: V. Sergeev
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