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On March 11–13, the first Youth Forum: Innovations in the Youth sponsored by the Federal Youth Agency was held in Moscow.

Andrei Klepach, Deputy Minister of Economic Development said that the results of GDP growth rates in February 2014 exceeded somewhat the expectations of the Ministry of Economic Development. However, in his view, it is premature to make conclusions about the exit of the Russian economy from stagnation.

As a result of sanctions introduced by the US and the EU against Russia, Fitch and Standard & Poor's international rating agencies revised downward the forecast of Russia's long-term rating from "stable" to "negative".

On March 3-5, the Business Survey Department of the Gaidar Institute carried out an express-business survey as regards a possible impact of the negative scenario of military and political developments around Ukraine on output volumes. The past few days of the crisis were characterized by the following two important events: the referendum in Crimea and the subsequent inclusion of Crimea and Sevastopol in the Russian Federation. The above prompted us to carry out another business survey with the same question, but in principally new conditions.

The actual development of the crisis changed expectations of the Russian industry. Among the surveyed enterprises, there were fewer forecasts of restraining influence of the crisis on output volumes. If in the first business survey, such forecasts were registered with 46% of enterprises, at present they amounted only to 37%; the share of “there will be no particular effect” answers increased to 57%, while the forecasts of a positive effect amounted to 7%. So, the industry became less pessimistic in evaluation of the impact of the Ukrainian crisis on its output.

A detailed comparison of the results of both the surveys at the micro-level (it was possible to do that because almost the same enterprises took part in the business survey) showed that about 80% of participants preserved their forecasts of the impact of the negative development of the crisis on output volumes, while 17% and 3% of enterprises changed them for the better and for the worse, respectively.

The latest estimates show that the negative effect of the crisis is particularly strong in the Russian iron and steel industry, while the chemical industry and engineering revised their forecasts for the better, but still remained among the leaders as regards expectations of a drop in output. A decrease in output is possible at 30% of enterprises of the light industry.

Public statements by “our partners in the West” about target sanctions seem to have had an effect on evaluation of consequences by Russian enterprises. If in the first business survey, the industrial state sector expected the modest impact of the Ukrainian crisis on its output, at present such concerns among state-run enterprises are the most wide-spread. Joint-stock companies forecast twice as rarely a drop in output.

Dependence of growth in negative forecasts of the output dynamics on growth in the size of an enterprise prevailed, but all the size groups started to expect a less large-scale drop in output.

Summing up the results of both the express business-surveys on the impact of the negative development of the Ukrainian crisis on the output of the Russian industry, it can be concluded that, firstly, the escalation of the crisis will have negative consequences for the domestic industry, secondly, different industrial sectors will be hit by the Ukrainian crisis to a different extent and, thirdly, the specifics of state-building in modern Ukraine, bourgeois spinelessness of “our Western partners” and resolve of Russian authorities permitted enterprises to diminish the pessimism of the first business surveys.

Sergei Tsukhlo, PhD (Economics), Head of the Business Surveys Department

On March 18, 2014 Russia's Ministry of Finance posted on its website Draft Federal Law "Concerning Amendments to Parts One and Two of the Tax Code of the Russian Federation (as related to taxation of profits of controlled foreign companies and increase of efficiency of the tax administration of foreign organizations)."

In January 2014, the Rosstat published the updated data on the dynamics of industrial development in the 2010-2013 period which situation makes it necessary to adjust the earlier made conclusions on the nature and rate at which consequences of the crisis are being overcome.

Today, an article by G. Khanin and D. Fomin was published in the mass media. The authors of the above article put forward a thesis that the official macroeconomic statistics published by the Rosstat, primarily, the data on the dynamics of GDP, individual industries and capital funds is distorted.

In the present-day conditions, if sanctions against Russia eliminate an opportunity for Russian borrowers to take new loans even a short-term period during which such sanctions are in force will deal a serious blow to the balance of capital flows.

On the threshold of the referendum in Crimea on Friday, stock market indices in Russia kept falling. Having started with a 2%–2.5% drop, two hours later after the beginning of the trading session they lost over 5%. The weighted average USD exchange rate at the unified trading session appreciated by 18.25 kopeks and amounted to Rb 36.639.
It is not the fact of Crimea's possible joining to Russia that affects the ruble exchange rate, but a threat of Western sanctions against Russia and a capital flight. It is to be noted that the effect of the capital outflow on the ruble exchange rate will be more dramatic that the sanctions alone. The outflow of capital will be substantial in terms of demand on and supply of the foreign currency. With taking into account the panic on the market, depreciation of the ruble will be a dramatic one.

However, things are not that bad. If future, the balance will return to normal provided that high oil prices prevail. If the capital flight stops, the opposite trend will start, that is, appreciation of the ruble.

With taking into account both the panic on financial markets and maintaining by the Central Bank of Russia of high interest rates, it is early to say whether the Russian economy faces a substantial recession. However, it is already clear that the economy will hardly achieve the expected indices by the end of the year. Maybe, there will be zero growth or an insignificant slump. However, it is to be repeated that nothing can be said definitely until the panic subsides.

Alexei Vedev, Head of the Structural Research Center

On February 11, the mass media reported that Andrei Klepach, Deputy Minister of Economic Development of the Russian Federation would leave his office to be appointed the Deputy Chairman of the Bank for Foreign Economic Affairs. In our view, Klepach's departure from the Ministry of Economic Development is highly predictable: in present conditions economic development forecasting is a difficult task. Balancing between real trends in economy and forecast declarations of the authorities is becoming more and more complicated.

The Ukranian crisis which began in the past few days has already caused a dramatic and volatile reaction on the stock and foreign exchange markets. What are the expectations and mood in the Russian industry now? How did the Ukrainian crisis affect (may affect) the real sector of the economy?

On March 3, 2014, the Central Bank of Russia raised the key interest rate from 5.5% to 7% per annum in order to protect the national currency.

The Federal Treasury began on February 20, 2014, according to the information available on the official website of the Ministry of Finance (Minfin) of Russia and the Federal Treasury, to conduct foreign exchange purchase transactions in the domestic foreign exchange market with a view to replenishing the Reserve Fund contribute with extra federal budget oil and gas revenues.

The Federal State Statistics Service (Rosstat) published on February 19, 2014 its data on the dynamics of the principal macroeconomic indicators in January 2014 year-over-year.

A few days ago the Ministry of Finance (Minfin) of Russia published its plans on the purchase of foreign exchange to replenish the Reserve Fund. The Minfin and Federal Treasury will buy fr om the Central Bank of Russia foreign exchange in an amount equivalent to Rb 3,5bn to able to collect Rb 212,2bn of extra federal budget oil and gas revenues for the Reserve Fund before the end of May 2014. The foreign exchange market has responded to the news with another crash in the ruble exchange rate.