BOFIT Weekly Review 2015/06
Russian government approves economic support programme
The aims of the programme adopted last week include stabilising Russia’s economic conditions, supporting import substitution as well as improving diversification of the structure of Russian exports. Special emphasis is made on securing the activities of core branches and companies, supporting the banking sector and protecting social entitlements. The programme includes financial support and measures aiming to reduce bureaucracy and regulatory burdens. Many Russian economic experts have, however, criticised the programme for failing to address properly Russia’s fundamental need for structural economic reforms and measures for restoring growth.
Total programme costs this year are estimated to exceed 1.3 trillion rubles (€17 billion), of which just over 200 billion rubles are designated as government guarantees. Half of the actual support funding should come out of the federal budget and half out of the National Welfare Fund.
Up to 550 billion rubles will come from the National Welfare Fund, or about 10 % of the fund’s present value. The money will be used to recapitalise banks and provide more funding for the VEB development bank to boost lending. Banks receiving capital infusions, in turn, must forward the funds for the financing of major infrastructure projects.
Some 450 billion rubles in federal budget spending will go to social programmes and transfers to regional budgets, while 100 billion rubles will go to support various industrial branches. Most of the support is slated for agriculture, farm machinery and the car industry. The details and timing of budget funding have yet to be decided.
The programme does not abandon previously announced budget spending cuts and hence the support measures should be financed by cutting and making other spending more effective. The economy ministry would like to see the support measures implemented as fast as possible, while the finance ministry favours a more patient approach. According to media reports, initial agreement was reached on support measures worth just over 20 billion rubles to be implemented in the first quarter of this year.