On Russia’s anti-crisis measures

Ambassador's view
Dr Alexander Yakovenko, Russian Ambassador to the United Kingdom of Great Britain and Northern Ireland, Deputy foreign minister (2005-2011). Follow him on Twitter @Amb_Yakovenko
Reuters / Eduard Korniyenko
Given the negative trend in Russia’s economy caused by many factors, such as the fall in oil prices and sanctions, the Russian government has agreed the "Priority Action Plan for the sustainable development of the economy and social stability in 2015".

The plan, costing about $35 billion, is to support the Russian economy during a period of unprecedented external political and economic pressure. It includes 60 measures aimed at securing sustainable economic development and social stability during this period, and follows three basic principles - to encourage economic growth, support priority industries and fulfill all social commitments. The measures stipulated for 2015-2016 are designed to accelerate restructuring of the economy, stabilize strategic companies in the key sectors, balance the labor market, reduce inflation, moderate the consequences of consumer price increases for low-income families as well as secure sustainable growth and macroeconomic stability in the medium-term.

The plan includes the following key actions: supporting import substitution and exports in the non-commodities industries, including the high-tech sector; assisting the development of SMEs by reducing cost of capital and their administrative expenditures; creating conditions for attracting investments in the key sectors; compensating additional inflation outlays of the most exposed social groups, such as pensioners and large families; reducing tensions in the labor market and supporting full employment; optimizing budget expenses, concentrating resources in the priority areas of development and fulfilling all social commitments made by the government; securing soundness of the banking system and creating financial support mechanism for strategic companies.

The document provides for budget expenditure cuts of 10 percent in 2015, primarily by slashing inefficient spending. At the same time, all social commitments will be fulfilled, which requires additional budgetary allocations. Moreover, spending on defense, agriculture and Russia’s international obligations will not be reduced. Government investment will be focused primarily on completing current projects, while the start of some new projects will be delayed. Financing of government bodies will be reduced.

We believe that the gradual stabilization of the global commodity markets as well as measures taken by the Bank of Russia will secure the foreign currency market stability and at the same time create conditions for reducing interest rates and increasing loan affordability. This, in combination with the increased price competitiveness of Russian products due to the ruble weakening, will help basic industries to gradually overcome the recession. The accompanying decrease in the inflation rate in the consumer market will reduce the crisis effects on the standard of living in Russia.

While implementing emergency anti-recession measures, we will also prioritize structural reforms to diversify the national economy and create conditions for sustainable economic growth in the medium- term.

To secure better results, all the measures mentioned will be implemented by the government in close cooperation with the Federal Assembly of the Russian Federation, regional and local authorities, as well as with the professional and expert community. The Action Plan will be modified if necessary.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.