Ends 2019 year — difficult for the Russian economy. Why our economy is mired in stagnation and there are no prerequisites for the release of her than the harm a tax increase, why the threat of sanctions, when will the new world crisis about says in an interview with the Director of the Institute for strategic analysis of the company “Financial and accounting consultants”, doctor of Economics Igor Nikolaev.
“When you realize that the official statistics cannot be trusted, the case is really bad”
— What events, factors and trends of the outgoing year the economy do you consider decisive?
— Let’s start with the positive. Inflation came in below expectations. It was expected that it will be around 4%, but in fact at the end of the year it will be 3-3,5%. It’s not a record low. But, nevertheless, decent. And yet it’s a plus that requires reservations. It is that to a considerable extent this result is achieved due to the fact that the purchasing power of the population was low. Real incomes are not growing in 2014. Therefore, on the one hand, low inflation, but on the other, if people cannot buy goods and services, then what’s to celebrate?
The next plus is a budget surplus. Surplus from 1.5 to 3 trillion rubles. Here it is also worth noting the national welfare Fund, which by its volume reached 7% of GDP. There accumulated about 8 trillion rubles, which is big money.
But here again is to make a reservation. If so much money, then why was it necessary to raise the VAT rate? The surplus measured in trillions, well, added a few hundred billion due to the increase VAT. Why? Further, why at these rates it was necessary to raise the retirement age?
The ruble against the US dollar was stable at 60 roubles. It is also, incidentally, determined a relatively low level of inflation. The stability of the national currency was provided, and the overall predictability of the economic situation. All this advantages.
Now let’s talk about the cons. The main disadvantage is that demographic. We have natural population decline for the year will be minus 300 thousand people. This is much higher than it was in 2018. Then the decrease was more than 220 thousand people. The situation is getting worse, despite all the measures taken.
The situation in health care is very poor. Even the government admitted that reform in health care has failed. Manifestations of this are different: the lack of medicines, the medical points are not built in the promised amount, the salaries of doctors is still low, etc. are First optimized, and then can’t build what they promised.
Disappointment of the year was the increase in the retirement age. However, it was in the power saving mode. For those who this year had to retire, the shift happened for six months. But nonetheless.
Well, another negative factor. Has seriously deteriorated the quality of official economic statistics. And so we have high uncertainty in the economic situation, and when you realize that the official statistics cannot be trusted, the case is really bad.
One of the positive economic results of the year, perhaps, is the decline in interest rates. The key rate of the Central Bank was reduced by 1.5% from 7.75% to 6.25% per annum. What do you think, will this become an incentive for the production and raising living standards in the new year?
— The economy on the basis of 2019, rose 1.3%. And this is much less than in 2018 plus 2.3%, when the rate was high. I remind you that at the end of 2014 the key rate was dramatically increased to 17%, although a few months before that we rate was 5.5%. And that, at the low rate was some rapid growth of the economy? Nothing of the sort. That is, the reduction of the key rate is a good thing. But as we can see, the only rate reduction does not lead to a significant increase in the rate of economic growth. For business critical determinism of the situation. Life shows that even if the stakes are high, for business plans is more important than determinism. It is impossible to call a high bet some insurmountable obstacle.
With regard to credit availability, on the one hand, they do become more affordable, but the population and so leveraged. In the autumn of the year, we saw a sharp decline in lending activity. The Central Bank was just forced to tighten rules for issuing loans, because have already formed a bubble that could burst. It turns out that it seems the rate has dropped, the loans became more accessible, but compared to stagnating real disposable income of credit activity is reduced. That is, when decreasing the rate, we have the decline in lending activity. It says that clearly one should not overestimate the importance to the economy of lowering the key rate.
Vladimir Putin and the Minister of economic development Maxim ОрешкинKremlin.ru
— Are you skeptical about the need to increase VAT rates. Russia almost a year had increased the VAT rate from 18% to 20%, the law came into force on 1 January 2019. The VAT increase in Russia brought additional revenues to the state budget by 650 billion rubles, which is comparable to 0.6% of GDP. Finance Minister Anton Siluanov said that the funds from the increase in VAT will go to stimulate economic growth. In your opinion, is it feasible?
— There are two ways how to spend the money. First — we keep more money and create comfortable conditions for investments. The second we raise the bet, collect the money, and now the state will Finance. But how? More will add money on national projects? This is qualitatively very different approaches. It seems that in both cases, the money in the economy. But when the investment decision takes the business he knows best what will bring the maximum results, because its prospects depend on the efficiency of spending of these funds. And when the decision is made by the state, then you can be sure the money will be spent with much less efficiency. The money please take business, and then after the budget is put back into the economy, is unlikely to yield a higher return than it could do business. That is, in its own way Siluanov right, but I don’t agree with this approach.
“We need a lot of time to think, to come out of the shadows or not”
Recently it was reported that in Russia for last year has closed 668 thousand legal persons. In your opinion, a lot or a little for our economy, and what was the result?
Such figures always have to compare with the number for the same year was opened. This process is also in the hundreds of thousands. Some closed, others open. But one thing is clear — when you raise taxes, then surely it does not stimulate business development. Analyzing the factor of closing of legal entities, it is necessary to remember about another important tax innovations in 2019 is a tax on the self-employed. However, while it was in the four regions. Small businesses were closed because of the transfer of their employees to the status of self-employed allows you to pay more sparing tax. Even if you were in the simplified tax system, it is still there, you had to pay additional social contributions, that’s more than 30 thousand rubles per year. And here you pay 4% if a “physics” work, 6% — if legal persons. So on the one hand, VAT has increased, and on the other due to the factor of the experiment with self-employed was profitable to close small enterprises and to renounce the status of individual entrepreneurs. All of this, I believe, led to the figures you mentioned.
— You say, to be self-employed cheaper than the same individual entrepreneur. In 2020, the experiment will be expanded to cover an additional 19 regions of the country (in addition to the current regions). The experiment failed as it was declared by the speaker of the Federation Council Valentina Matvienko. “Now every self-employed person feels a law-abiding citizen, understands that pays taxes and requires a double respect,” she said. Do you agree?
— Surprising to hear such statements. It was decided that this experiment is designed for 10 years. A few months later we hear that the experiment has justified itself. If it’s an experiment, you experiment at the designated time and create a complete picture on this issue. What they wanted to achieve with the introduction of this status? To bring small business out of the shadows? Many of those who became self-employed, and so work on the light in the status of individual entrepreneurs. It turns out that they this goal. But if reached, then give the full deal, who is registered as self-employed. But I think the effect turned out otherwise. They wanted to pull into the light those who were working without registration, and did not pay any taxes, but it turned out that those who worked face-down, so it remained, and small businesses and entrepreneurs just registered self-employed and have to pay less tax. That is, in my opinion, to say that the experiment was a success, at least prematurely.
And then, this innovation involves a penalty for the concealment of the proceeds. But the question arises: how do intend to track this revenue, if self-employed in the shadows? If a person works with physicists, it might arbitrarily be called the amount of his income. Because no cash registers or receipts no. That is, it will report that earned a million, will pay 4%, and he would say that he is a part of the income concealed. For repeated violation the penalty with you right down to the same one million. Here are the potential risks of the law for small businesses.
Besides, we have established some rates: 4% and 6%. But where is the guarantee that in a year you do not make the rate of 10% and 20%, if so famously adopted the law on the experiment, and after a few months it changed and want to change even? You’ve registered — then you are already lit up before the tax authorities, thinking that you will have to pay only 4%. But know that there is no confidence that in a year or two this bet will increase several times, no. And here he worked for many years as a teacher, a hairdresser, a programmer at home, or someone else, and now find themselves on the hook for the state, which, as we have seen, his words not hold. So, it turns out, have a lot of time to think, to emerge from the shadows or not.
“Politicians, solve the problem of sanctions is a real threat”
— How do you assess the pace of growth in the past year? Russia began to produce more?
— Slight increase, the industrial production in January-November 2019 rose 2.4%. It’s more of GDP growth. However, when I look at the figures for industrial growth, then over each digit I think: is it possible to believe her? Particularly revealing for me was the Rosstat data on dynamics of industrial production in June 2019, when the total figure was +3.3% in annual terms, and this figure is even mathematically not consistent with the dynamics of the four main types of activities that make up this industry are: mining, manufacturing, electricity and gas, water supply and sanitation. However, no one even bothered to fix it.
— You mentioned GDP growth. By the end of 2019, he was 1%-1,3%. What does this mean?
— It speaks of a state close to stagnation. The global economy in 2019 has grown by 3%. Our rate is less serious development in the whole world. And we, in accordance with the may decrees of 2018, was to get on the pace of economic growth than the global average. If a train goes with speed plus 3% while you are in your car have the growth rate more than two times less than that, your trailer behind. If so then it will go, it is not today or tomorrow will ever stop, and the train of the global economy, meanwhile, will go far ahead. And catch up it will no longer be possible. I is the state of the Russian economy is called the lagging development.
— What, in your opinion, needs to change in the economic policy of the Russian government to get out of the lagging development of which you speak?
— That is why I said about such factors as uncertainty of economic situation. Rosstat conducts a monthly survey of businesses, Directors of enterprises, asking them about the factors which are most de-stimulate economic development. In recent years the business the main factors of destimulate calls a high tax burden, economic uncertainty, lack of own financial resources. By the way, the high rate of a commercial loan has never been in the first place. It’s always 4-5 place among factors which, in the opinion business, and hamper its development.
Hence the conclusion: if a business calls these factors as those which impede development, it is logical that if you want to change the situation, it is necessary, first, not to raise but to reduce the tax burden, and secondly, it is necessary to reduce the uncertainty of the economic situation. We must admit that the uncertainty of the economic situation largely determined by the sanctions confrontation. Business, especially large, does not understand: so all the same will ask for more sanctions, or until you can live?
In response to such sentiments business we summit have strengthened this opinion, that’s okay, you can live under sanctions. The trouble with sanctions is not that became harder to borrow funds or to any technology. Their main threat — they carry the uncertainty of the economic situation. Consequently, it is necessary to solve the problem with the sanctions. But I would argue: but that’s politics! But I’m talking as an economist. Sanctions for the economy is evil, because they create high economic uncertainty. And if everything depends on the policy to eliminate this evil, then I can say in response: “Policies, solve the problem of sanctions is a real threat!”
So I would highlight two factors: lower taxes and reduce the uncertainty of the economic situation. And in this regard it should be noted that not indisputable the proposal is presented to increase the basic personal income tax rate to 16% with the simultaneous abolition of this tax for the poor. Pursuing the sort of good purpose, we thus for many will raise income tax, and it will be sensitive.
— What is your prediction for 2020? First, in terms of the level of life in Russia. Secondly, in terms of tax policy. Thirdly, the economic situation of Russia. And fourth, should we expect a crisis, which for 2019 several times predicted?
— The global economic crisis is bound to be, the cyclical nature of world economic development has not been canceled. But, most likely, not in 2020, and 2021. Bubbles formed, they burst, usually at the worst possible time. As a whole in the global economy is the trend in the slowdown. Global GDP growth of 3% — the lowest rate since the global crisis in 2009. And he continues to slow. And the inertia is an important factor that must be considered. It is important for Russia, because the slowdown in the global economy — a decline in energy prices. Piping we, of course, we will build. But what are we going to fill them with declining demand for hydrocarbons? And he will decline. And not only because the world economy is slowing down. But in the climate factor. View on Moscow, what’s happening with the weather in December 2019. This is very disturbing. Climate change — global warming — means that consumption growth of hydrocarbons will slow down. On the other hand, rising costs to switch to other energy sources.
There are other factors that will lower the pace of the global economy. We see growing social protest activity. This year was significant in this sense: Chile, Ecuador, Bolivia, Lebanon, France, Hong Kong — there is always powerfully voiced protests. In General, problems in the global economy will inevitably grow.
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As for Russia, it seems, sanctions will intensify. Thus, the external factors for the Russian economy is poor. In addition, in 2020 we are in a state of stagnation. And bulky for our economy that matters. In this economy the force of inertia is large. It’s one thing when you have worked and you can take a year to slip into the pace. Another thing — slowly crawled. Thus structurally, the economy remains the same — it commodity. Attempts to rebuild. But the problem is that the implementation of a major restructuring corny takes time. We are mired in structural disparities, this further exacerbates the problems of our economy.
Hence the conclusion: we hang out around zero. In a big minus will not lose it. Then there will be the same stagnation that in the past year, only in a slightly worse form. The people’s living standards will stagnate, and I remind you that in recent years he just fell. But we comfort ourselves that the worst is probably ahead. So 2020 is not yet the worst.
I would not, of course, to end the conversation on this note. Therefore, let’s not forget that the crisis passes, even the future.
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