Alexey Ulyukaev: Our economy is expecting a signal. Cancellation of anti-Russian sanctions could be the one.


Russian economy which is in the balancing phase since summer last year is now expecting the signal for moving up. Upon estimations of the Ministry of Economic Development, one can expect the GDP growth by the end of 2016, but only in the case when annual average prices of Brent oil are more than 40 US dollars per barrel.

It is not worth hoping for sharp drop of the dollar’s exchange rate. Which it will be, as well as perspectives of industrial production in Russia and the most auspicious moment for increase of pension age, the Minister of Economic Development Alexey Ulyukaev told about on the business breakfast in Rossiyskaya Gazeta.

Alexey Valentinovich, you predicted recently the economic growth already during this year, and the one of the industrial production – in the second quarter of 2016. It is difficult to get over this fact because investment banks and analytics expect economic contraction approximately on the level of last year. What is the basis of your forecasts?

Alexey Ulyukaev: Actually, predictions and forecasts are different things. Any assumption of an officer or analyst we used to call a forecast quite often. But just as the budget preparation is done by the Ministry of Finance only, so the forecast is done by the Ministry of Economic Development only. Nevertheless, I do not see significant deviations between estimations of different specialists and our forecasts.

Our official forecast, which have been built on the annual average oil prices just above than those are today (41.5 US dollar per barrel of Brent), supposed the economic growth by 0.7 percent. When they are 40 US dollars per barrel, then the growth is from zero till minus 0.5 percent. So we do not reach the economic growth during this year having this scenario.

The situation, which we are today in, has changed in principle from the middle of July 2015, after the GDP’s sharp drop which covered the fourth quarter of 2014 and the first and the second quarters of 2015. We entered the unstable equilibrium position during which in half cases from month to month GDP showed the growth by 0.1 percent and in another case it showed decrease by 0.1 percent after clearing from seasonal drivers. If one cumulates all the pluses and minuses of GDP and industrial production, one will get zero.

Our economy is expecting a signal. Cancellation or dilution of anti-Russian sanctions could be the one, which would mean the possibility of entry to the international capital markets. Change of the policy of the Bank of Russia could also be such a signal, namely the significant decrease of key rate taking into account the current and the expected inflation rate level. Presently, the gap between the key rate (11 percent) and the annual inflation rate (7.8 percent) is 3.2 percent. During the last 3.5 years only one month had such a gap, it was December of 2014. During the rest months the key rate was either below the inflation rate or approximately a little bit higher, by 0.1 – 0.5 percent.

More active support of investments by the state could be such a signal for economy too. From the point of view of a private investor, if the state does not invest, it has a reason for that, it sees risks including fiscal and regulative ones.

Coming back to figures: a slight growth of industrial production emerged during January-February of this year which will be kept, and the whole dynamic of the GDP for the year will be either zero or a slight minus. It was minus 2.7 percent in January taking into account clearing from leap-day in February – the figures remained the same. At the boundary between the second and the third quarters we should move over to the positive area. Partially this is the result of the low base of the previous year. 

Talking about the positive signal, can one suppose that following the oil price increase the dollar exchange rate will descent to 50 rubles.

Alexey Ulyukaev: It is already not a forecast but a prediction. Actually, the external payments position –influence over range of currencies, the current account and the capital one. The first one reflects the oil market conditions, the second one influences highly sometimes, sometimes does not so much. The practice shows that during the low value of the oil price the correlation with ruble’s exchange rate increases almost up to 100 percent. The higher the oil price is, the lower the dependency is, and the capital account gets the bigger role.

And in the last year and in this one the condition of the capital account is much better than it was forecasted proceeding from the external debt payment schedule. Actually everything is a bit different: partially they are inter-holding debts, i.e., “I owe to myself through all my daughter and off-shore companies.” One can afford nonpayment to himself.

Sometimes it is possible to refinance, which the practice showed informatively: there were at least three successful issues of bonds of Russian companies nominated in a currency last year.

Most probably, basing on these factors, the ruble should be a bit stronger than we assumed last year in case of the current oil prices. I think that annual average exchange rate of the dollar will be within dynamic of 60 – 70 rubles. More probability is that it will be 65 – 70.

If one bases on the today’s figures of 67.5 rubles per dollar and 41.5 dollars per barrel. We multiply and  we get around 2.8 thousand rubles, which is much closer to the standard values than it was expected. All the positions are coming to a balance gradually, and this applies to the behavior of population and business, the saving activity, the finance markets’ condition, the level of banks’ reserves, the devaluation and inflation expectations. The re-balancing will continue during the whole year.

There was the suggestion mentioned that the pension age is worth raising already after parliament elections in September this year. What is your opinion about that?

Alexey Ulyukaev: Apparently that the rise of pension age is bad but unavoidable decision, and it will be definitely taken. The question is only when and how to do it, because such a decision will touch the position of all people, social and political situation.

I think it is feasible to announce this during electively calm period, for example at the end of the year 2016. And the calculations should be completed already now.

How to act – keep the lag between the retirement of men and women or even it as it is done in major countries? Basic proposal is to have the equal value of 63 years (currently it is 55 years with women and 60 for men). One more variant is to keep the five years gap and rise up to the level of 60 and 65 years correspondingly. From my point of view it is less rational.

Which step of rise to do? It is logically to raise the pension age by half a year. If we take the level of 63 years, then for women it will be necessary to take 16 annual steps. The parameters can be different because the logic exists in all the variants but it is necessary to observe how people who will be touched by the reform are spread by industries, how this will impact their income and other.

This analytical work is being done by us, the Ministry of Labor, the Ministry of Finance, it is necessary to match our estimations and develop a common position.