ALEXEI VEDEV ADDRESSED THE “POST-PANDEMIC WORLD AND RUSSIA: THE NEW REALITY?” ONLINE CONFERENCE
On May 14, 2020, Alexei Vedev, Head of the Financial Studies Department, Gaidar Institute took part in the “Post-Pandemic World and Russia: New Reality?”online session held within the framework of the Moscow Academic Economic Forum (MAEF).
The conference was dedicated to the discussion of the current economic situation, the strategy of revival of the Russian economy and exit from the crisis and measures aimed at recovering the employment and households’ incomes.
In his report, Alexei Vedev noted that the government switched over to the economic stimulus policies which would facilitate sustainable economic growth.
“Two days ago, I placed a column in the Vedomosti daily in which I presented the economic assessment of the current situation. I would like to point out two priority points:
1. A drop in households’ incomes is to be compensated out of public Funds; the calculations should be carried out in terms of GDP indices and real disposable cash income of households, rather than in definitions; it is necessary to use resources of the National Welfare Fund, currency issue and external borrowings.
2. Potential growth. It became clear in autumn 2019 that Russia’s growth was weak. That situation gave rise to the debates in the economic block of the Government: the Ministry of Economic Development accused the Ministry of Finance and the RF Central Bank of an extremely tough budgetary policy and tough monetary policy, respectively. The RF Central Bank opposed the financial stimulus policies, while the Ministry of Finance was upholding the policy of macroeconomic stability. The rhetoric has radically changed now. The Ministry of Finance does not insist on the surplus budget and it means that that the Ministry of Finance will be giving the economy more than it takes from it. The authorities are discussing the issue of increasing external and internal debts and introducing tax abatements which measures point to a switchover to financial stimulus policies that should be maintained not only till the exit from the pandemic, but also in the next few years.
The monetary policy is aimed at shifting, too. I believe the real interest rate can be reduced from 2%–3% to 0%. It is obvious that in the near future the liquidity surplus will decrease and banks will be refinanced by the Central Bank of Russia. Also, it is important that double targeting is taking place. The RF Central Bank targets not only the inflation rate, but also furthers the financial stability. The banking sector is doing well, state-owned banks dominate and such a situation is quite convenient for the government to carry out anti-crisis measures. But being aware of the lobbying potential of state-owned banks, one can expect them to shift all risks to the state and preserve their high financial result. Such a situation is quite comfortable, but dangerous in terms of the fact that the banking sector should facilitate economic growth, rather than receive record-high profits. I believe that the easing of the financial policy should be maintained in the near future to facilitate sustainable economic growth”, Alexei Vedev concludes.
The online conference was attended by: Abel Aganbegyan, Co-Chairman of the Program Committee of the International College of Economics and Finance, Head of the Department of Economic Theory and Policy , RANEPA, Academician of the Russian Academy of Sciences, Doctor of Science, Economics, Professor; Alexander Dynkin, Co-Chairman of the Program Committee of the International College of Economics and Finance, President of the E.M. Primakov IMEMO of the RAS, Member of the Presidium of the RAS, Academician of the RAS, Doctor of Science, Economics, Professor; Alexander Nekipelov, Vice President of the VEO of Russia, Director of the Moscow School of Economics of the M.V. Lomonosov Moscow State University, Doctor of Science, Economics, Professor; Boris Porfiriev, Co-Chairman of the Program Committee of the International College of Economics and Finance, Member of the Presidium of the RAS, Member of the Presidium of the VEO of Russia, Director of the Institute of Economic Forecasting of the Russian Academy of Sciences, Academician of the RAS, Doctor of Science, Economics, Professor; Konstantin Korischenko, Head of the Stock Markets and Financial Engineering Department of the Banking and Finance Division, RANEPA, Doctor of Science, Economics; Robert Nigmatulin, Member of the Board of the VEO of Russia, Academic Advisor of the P.P. Shirshov Institute of Ocean Science of the Russian Academy of Sciences, Member of the Presidium of the RAS, Academician of the RAS, Doctor of Physical and Mathematical Sciences; Andrei Klepach, Board Member of the VEO of Russia, Deputy Chairman (Chief Economist) of the Vneshekonombank; Ruslan Grinberg, Co-Chairman of the Organizing Committee of the International College of Economics and Finance, Vice President of the VEO of Russia, Academic Advisor of the Institute of Economics of the RAS, Corresponding Member of the RAS, Doctor of Science, Economics, Professor.
In his report, Alexei Vedev noted that the government switched over to the economic stimulus policies which would facilitate sustainable economic growth.
“Two days ago, I placed a column in the Vedomosti daily in which I presented the economic assessment of the current situation. I would like to point out two priority points:
1. A drop in households’ incomes is to be compensated out of public Funds; the calculations should be carried out in terms of GDP indices and real disposable cash income of households, rather than in definitions; it is necessary to use resources of the National Welfare Fund, currency issue and external borrowings.
2. Potential growth. It became clear in autumn 2019 that Russia’s growth was weak. That situation gave rise to the debates in the economic block of the Government: the Ministry of Economic Development accused the Ministry of Finance and the RF Central Bank of an extremely tough budgetary policy and tough monetary policy, respectively. The RF Central Bank opposed the financial stimulus policies, while the Ministry of Finance was upholding the policy of macroeconomic stability. The rhetoric has radically changed now. The Ministry of Finance does not insist on the surplus budget and it means that that the Ministry of Finance will be giving the economy more than it takes from it. The authorities are discussing the issue of increasing external and internal debts and introducing tax abatements which measures point to a switchover to financial stimulus policies that should be maintained not only till the exit from the pandemic, but also in the next few years.
The monetary policy is aimed at shifting, too. I believe the real interest rate can be reduced from 2%–3% to 0%. It is obvious that in the near future the liquidity surplus will decrease and banks will be refinanced by the Central Bank of Russia. Also, it is important that double targeting is taking place. The RF Central Bank targets not only the inflation rate, but also furthers the financial stability. The banking sector is doing well, state-owned banks dominate and such a situation is quite convenient for the government to carry out anti-crisis measures. But being aware of the lobbying potential of state-owned banks, one can expect them to shift all risks to the state and preserve their high financial result. Such a situation is quite comfortable, but dangerous in terms of the fact that the banking sector should facilitate economic growth, rather than receive record-high profits. I believe that the easing of the financial policy should be maintained in the near future to facilitate sustainable economic growth”, Alexei Vedev concludes.
The online conference was attended by: Abel Aganbegyan, Co-Chairman of the Program Committee of the International College of Economics and Finance, Head of the Department of Economic Theory and Policy , RANEPA, Academician of the Russian Academy of Sciences, Doctor of Science, Economics, Professor; Alexander Dynkin, Co-Chairman of the Program Committee of the International College of Economics and Finance, President of the E.M. Primakov IMEMO of the RAS, Member of the Presidium of the RAS, Academician of the RAS, Doctor of Science, Economics, Professor; Alexander Nekipelov, Vice President of the VEO of Russia, Director of the Moscow School of Economics of the M.V. Lomonosov Moscow State University, Doctor of Science, Economics, Professor; Boris Porfiriev, Co-Chairman of the Program Committee of the International College of Economics and Finance, Member of the Presidium of the RAS, Member of the Presidium of the VEO of Russia, Director of the Institute of Economic Forecasting of the Russian Academy of Sciences, Academician of the RAS, Doctor of Science, Economics, Professor; Konstantin Korischenko, Head of the Stock Markets and Financial Engineering Department of the Banking and Finance Division, RANEPA, Doctor of Science, Economics; Robert Nigmatulin, Member of the Board of the VEO of Russia, Academic Advisor of the P.P. Shirshov Institute of Ocean Science of the Russian Academy of Sciences, Member of the Presidium of the RAS, Academician of the RAS, Doctor of Physical and Mathematical Sciences; Andrei Klepach, Board Member of the VEO of Russia, Deputy Chairman (Chief Economist) of the Vneshekonombank; Ruslan Grinberg, Co-Chairman of the Organizing Committee of the International College of Economics and Finance, Vice President of the VEO of Russia, Academic Advisor of the Institute of Economics of the RAS, Corresponding Member of the RAS, Doctor of Science, Economics, Professor.