05.10.2018 - The Gaidar Readings in Dushanbe (Tadjikistan)

The Readings were organized by the Ye. T. Gaidar Institute for Economic Policy (IEP) and the Tajik State University of Economics and Finance (TSUEF).

The Gaidar Readings were opened by Rector of the Tajik State University of Economics and Finance, Hairozoda Shukrullo Kurbonali.

Moderators of the plenary session were Assistant to the President of Tajikistan for Economic Issues Solekhzoda Ashurboy and Executive Director of the Gaidar Institute Sergey Prikhodko.

The first speaker to address the participants in the Readings was Vladimir Mau, Rector of the Russian Presidential Academy of National Economy and Public Administration (RANEPA).

Lutfullo Saidmurodov, Director of the Institute of Economics and Demography of the Academy of Sciences of the Republic of Tajikistan, informed the audience on the strategic directions of socioeconomic development of the Republic of Tajikistan in conditions of economic globalization.

Aleksey Vedev, Head of the Structural Research Laboratory of the RANEPA, leading researcher of the Department of Financial Studies of the IEP, delivered a presentation focused on the key socioeconomic risks that the Russian Federation would face in the medium-term perspective.

It should be noted that the RF Government has made public its baseline scenario of Russia’s economic development oriented to the implementation of Presidential Executive Order of 7 May 2018, No 204 ‘On the National Goals and Strategic Tasks for Development of the Russian Federation until 2024’. The baseline scenario envisages that economic growth will sharply decline in 2019, and then gradually rebound to reach the required growth rates from 2021 onwards. As far as this economic growth dynamics is concerned, the baseline scenario envisages that the government should take upon itself the leading role in directing the economy. To achieve that end, the government should accumulate adequate resources to finance major investment projects, while the private sector should expand its productive activities by the year 2021.

According to Aleksey Vedev, the key risks observed under this scenario are as follows.

Until 2021, costs are expected to stay on the rise across the Russian economy, as the growth rate of real wages and salaries will be hovering significantly above that of labor productivity, and it is unlikely that this trend may be reversed ‘peacefully’ without triggering a crisis and a sharp plunge of wages and salaries.

The RUB-to-USD exchange rate corridor is expected to stabilize within the range of RUB 64–68 throughout the entire scenario period alongside slightly sliding oil prices, and this projection looks rather controversial in face of the current downward trend displayed by the ruble’s forex exchange rate movement pattern coupled with rising oil prices. Moreover, there is no mention of any budgetary rule easing in the scenario documents.

The situation with regard to retail bank loans has been progressively worsening. As of mid-year 2018, the amount of debt outstanding was RUB 13.7 trillion, its growth over the past year having increased to 19% - that is, significantly above the household nominal income growth index. However, the most alarming trend has been the constant hovering of the growth rate of bank loans and interest rate above that of nominal household income, which means that the relative share of debt servicing costs in the structure of household incomes is likewise increasing.

The speaker noted that many experts are expecting the external economic background to get worse by 2020–2021 (decline of global GDP growth rate, plunging prices for energy carriers, etc., coupled with ongoing economic sanctions and restrictions on the access of foreign capital to Russia’s domestic market), which will serve as an additional negative factor influencing the opportunities for growth in the Russian economy over the period 2021–2024.

Andrey Petrosyan, Director of the Centre for Integration Studies at the Eurasian Development Bank, outlined in his presentation the role of institutional development in the integration processes. He emphasized the impact of the Eurasian Economic Union (EAEU) on the integration processes, its strategic goals and the main ways in which it differs from the European Union. According to Mr. Petrosyan, the creation of the EAEU was the first truly successful interstate cooperation project launched in the post-Soviet space, and today we may already speak of a well-formed economic union that undergoes gradual integration-oriented development.

Besides, the speaker made note of the fact that the global economy internationalization is followed by the increasingly prominent function of financial development institutions. The objective drivers behind that process have been the global human society development issues that have to do primarily with environmental protection, inadequate or distorted infrastructure development, and some pressing social issues that need to be addressed but cannot be expected to yield any short-term profits, and in certain cases – to guarantee any return on investment.

In his presentation, Sergey Drobyshevsky, Scientific Director of the Ye. T. Gaidar Institute for Economic Policy (IEP), offered an analysis of the budget maneuver in the RF as a factor capable of sustaining economic growth and the economy’s adaptation to potential external shocks. He noted that the budget maneuver implied keeping expenditure at 33.5–34.0% of GDP over the period 2019–2024; overcoming the chronic shortage of financing allocated to long-term development, estimated both in terms of international standards and the priorities set by Russia’s home policy; allocation of financing to the budget functions that are vital for the well-being of the citizens; expenditure financing based on improved performance and structural changes across the economy’s sectors; and altering the expenditure structure in response to changes in the development priorities. Besides, the suggested budget maneuver envisaged some changes in the tax system and the budgetary rule aimed at making the budget less dependent on the situation on the global markets.

Next was the presentation titled ‘Monetary Policy of the Bank of Russia in Conditions of Economic Instability’ by Pavel Trunin, Director of the Center for Macro-Economics and Finance of the Gaidar Institute and Director of the RANEPA Center for Central Banking Studies. The speaker analyzed the process of monetary policy normalization by the Bank of Russia after the crisis of 2014–2015, while at the same time identifying the factors that were behind the surge of financial instability in August 2018, which had prompted the Bank of Russia to once again raise its key rate. Among these, he pointed out both the factors specific for Russia and those associated with the economic sanctions, and the global factors that had to do with the significant capital outflow from the developing markets in response to the toughening US monetary policy.

The new opportunities and risks associated with the expansion of bilateral trade between Russia and Tajikistan were explored in his presentation by Alexander Pakhomov, leading researcher at the Center for Macroeconomic

Research of the Institute of Applied Economic Research (RANEPA).

The presentation by Head of the International Trade Department of the Gaidar Institute’s Center for Real Sector Alexander Knobel was titled ‘The Prospects for Developing Trade Cooperation between Russia and Tajikistan in the Context of the Eurasian Economic Union’.

In his presentation, Mr. Knobel emphasized the prominent role of the EAEU as a trade partner for Tajikistan, which was comparable with that of the EAEU for Armenia. He also noted the heterogeneity of the economies participating in the EAEU and the possibilities for integrating the economy of Tajikistan into the Union in conditions of that heterogeneity. The speaker outlined both the prospects for Eurasian integration and the problems that the EAEU member states will have to deal with alongside their progress towards a common market. He also presented the calculated effects of Tajikistan’s accession into the EAEU for the main macroeconomic variables. In particular, the aggregate potential macroeconomic effect for Tajikistan to the value of more than 2 pp. of its GDP per annum was noted.

Galina Kurlyandskaya, Director General of the Center for Fiscal Policy (Russia) and key expert of the EU Project (Tajikistan), spoke of the possibilities of borrowing Russia’s best practices for reforming interbudgetary relations in Tajikistan.

The Gaidar Readings in Dushanbe were rounded up by the presentation by Dilbar Kandyiarova, Professor of the Theory of Economics Chair at TSUEF, who addressed the challenges and prospects of the participation of the Republic of Tajikistan in the regional integration processes.

Presentation materials:

Vedev A. L. – The Key Risks of Medium-term Socioeconomic Development in the Russian Federation

Petrosyan A. R. - The Role of Financial Development Institutions in Integration Processes

Drobyshevsky S. M. – Adaptation of the RF Fiscal Policy to the Economic Development Goals and Potential External Shocks

Trunin P. V. - Monetary Policy of the Bank of Russia in Conditions of Economic Instability

Knobel A. Yu. - The Prospects for Developing Trade Cooperation between Russia and Tajikistan in the Context of the EAEU.