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On 3 December, the RF Ministry of Economic Development released information that its previously published GDP growth target for 2013 was lowered to 101.4% from 101.8%. The Ministry’s GDP growth rate for 2013 is downgraded as follows: industrial production - to 0.1% from 0.7%; investment in fixed assets - to 0.2% from 2.5%; retail turnover – to 3.8% from 4.3%.

It should be reminded that, according to Rosstat’s preliminary estimates, growth of the GDP physical volume index in Q3 amounted to 101.2% of its previous period’s level, and over the period of January-September 2013 – to 101.3% of its level over the corresponding period of 2012. Thus, the RF Ministry of Economic Development predicts that the growth rate is going to slightly accelerate over the last few months of 2013.  

Nevertheless, another fact to remember is that a number of key economic indicators have been on a downward trend for eighth quarter in a row. Over January-Octoberе 2013, the volume of investment in fixed assets amounted to 98.1%, and the volume of output in the construction sector – to 98.6% their corresponding 2012 indices. The financial results displayed by enterprises and organizations have been on the decline throughout the year 2013. Thus, the balance of profits and losses for the period of January-September 2013 amounted to 83.3%, including in the processing industry – to 68.3% of the corresponding indices for January-September 2012, a factor that sharply reduced the potential for enterprises and organizations to fund their investment programs without attracting loans. Investment in fixed assets relies in the main on government funding; the inflow of foreign investment remains at a low level.

That Russia’s domestic economy has a low investment attractiveness is evident by the fact that the share of foreign direct investment in the capital inflow structure remains at the level of 14.1%, while in the pre-crisis year 2008 it was 26.0%. Capital outflow is on the rise: over the period of January–September 2013, its volume rose to $ 48.1bn, or by $ 1.7bn above its corresponding last year’s index. Russian companies prefer to invest abroad, as seen by the fact that the volume of investment in Russia’s economy over January-September 2013 amounted to $ 132.4bn, while Russian investment abroad – to $ 162.3bn.

The rate of economic growth over the period of January-October 2013 was negatively influenced by declining net exports – according to the RF Ministry of Economic Development’s preliminary estimates, this index dropped by 8.8% on the corresponding period of last year. The growth rate of the per annum value of Russian exports has been dwindling for five quarters in a row. The growth rate of imports began to decline in Q1 2013, its downward movement being as follows: 6.5% – in Q1; 3.7% – in Q2; 0.4% in Q3 on the corresponding periods of 2012. In spite of the noted slowdown, the overall share of imports in the national economy, due to the stagnating output indices displayed by the core types of economic activity, did not diminish. The value structure of GDP displayed a change towards increased final consumption expenditure alongside shrinkage of the shares of gross savings and net exports.

The growth rate in the processing industry has been falling for six months in a row, since May 2013. This occurs due to the downward movement of effective demand, the low competitive capacity of domestic products by comparison with imports, and low productivity in industry. The national economy demonstrates declining production in the machine-building complex and the related sectors of engineering materials. Over January-October 2013, the output machinery and equipment shrank by 6.6%, that of electrical equipment – by 4.0%, that of transport vehicles – by 1.3%, and that in metallurgical industry – by 2.0% on the corresponding period of last year.

It is unlikely that, in the current situation, the growth rates in the core sectors of the national economy may accelerate in the year’s last quarter. So, it can be assumed that the year-end GDP growth index will not go above its level recorded in January-September 2013.

O.I. Izriadnova – Head of the Structural Policy Department

The Russian Federation has completed a second round of monitoring the performance level of higher educational establishments; its results have revealed that the licensing and accreditation procedures are applied inadequately, if at all.

The ten-weeks-long Geneva talks among World Trade Organization members have failed to produce a comprehensive ‘trade facilitation’ agreement initially expected to be signed at the Ninth WTO Ministerial Conference in Bali, Indonesia, early in December 2013. The proposed accord, once achieved, could have helped to breathe life into the moribund Doha round of world trade talks. So, yet another attempt to introduce the first-ever worldwide trade reform has failed.

On 27 November, Rosstat released official data on remuneration of the staff of federal bodies of state authority over the first 9 months of 2013.

At present, according to available information, a list of assignments is being prepared for the Presidential Executive Office and the RF Government, based on the results of the RF President’s meeting, on 8 November, with the delegates of the All-Russian Congress of Municipal Formations. Among other issues, they discussed the possibility of introducing changes in the powers of local authorities to dispose of their budget revenue and expenditure.

25 ноября 2013 г. во Всемирной торговой организации прошло заседание Совета по разрешению споров, на котором по запросу Евросоюза была сформировала панель арбитров по разрешению спора по режиму уплаты утилизационного сбора на автотранспортные средства, взимаемого в Российской Федерации.

As of 25 November, the annual growth rate of inflation amounted to 6.4%. According to the RF CB, inflation is expected to remain at about the current level until the end of the year. 

The battle against tax base dispersion has become the focus of attention not only in Russia, but also G20 and the OECD.

The US Federal Open Market Committee (FOMC) has confirmed its readiness to continue the third round of quantitative easing as planned. Thus, it will continue to buy government bonds and mortgage-backed securities in the amount of $ 85bn per month, and the key interest rate will stay in the interval of 0–0.25% per annum.

Towards the end of 2013, the ongoing discussions as to whether or not the third round of quantitative easing (QE3) was going to be scaled back became more intense. That this issue is the focus of interest is quite understandable because investors are expecting the traditional year-end rally. This is by no means a trite question, as the stock market since the year’s beginning has jumped up 20%, and investors are by no means reluctant to get an additional bonus in the first three weeks of December.

Currently, practically all the members of the US Federal Reserve Board are for the continuation of the quantitative easing policy. The situation in the US national economy is progressively improving. At the same time, unemployment does not decline, and its rate is at present above its target level of 7%. However, the inflation rate is significantly below its target of 2%, which means that the Federal Reserve System (FRS) has a strong potential for promotional measures.

There is yet another argument against the probability of QE3 being halted in the nearest future. Mr Ben S. Bernanke’s second term as Chairman of the Board of Governors of the FRS will end next year, which means that no key decisions are going to be made in December 2013. To do otherwise would have been an incorrect tactic in regard of the next Chairman, to come to the post in January. Of course, the Board of Governors cannot be expected to introduce any cardinal measures at its very first or second meeting, as it will be necessary to sustain the continuity of the FRS policy and positive investor outlooks on the US stock market.

So, no significant signs of an impending halt of QE3 can be noted yet; besides, such a decision would not appear to be well-substantiated even from the point of view of good tactics. My prediction is that, until Q1 2014, no changes can be expected. At the same time, the project will inevitably be curbed, but this will be done publicly and in a well-organized manner.

A.L. Vedev - Director of the Structural Research Center

From November 20, the Central Bank of Russia withdrew the license from the Master-Bank. According to the data the Central Bank of Russia, the Master-Bank granted at least Rb 20bn to individuals and companies affiliated with owners of the bank. Also, the bank was involved in cash withdrawal under suspicious transactions whose total volume amounted to about Rb 200bn. It is to be noted that the Master-Bank made over 100 violations of the law on prevention of money laundering.

On November 20, speaking at the plenary meeting of the State Duma E. Nabiullina, Chairman of the Central Bank of Russia said that slowdown of economic growth rates in Russia was of a structural nature. E. Nabiullina noted that a decrease in the growth rates for six quarters running resulted in the fact that growth of 1.5%-2% instead of that of 5%-6% was becoming a new norm.

From the beginning of 2013, the monetary base in broad terms decreased by Rb 901bn, including Rb 165bn in October.

On November 13, 2013, Alexei Ulyukaev, the Minister of Economic Development of the Russian Federation said that in 2013 GDP growth may happen to be below the forecasted 1.8%. Alexei Ulyukaev did not rule out that on the basis of the results of the year economic growth would amount to 1.5%-1.6%.

At the meeting with heads of departments of constitutional and legal disciplines of higher educational establishments of the Russian Federation, Vladimir Putin, President of the Russian Federation said for the first time that progressive scale of the individual income tax was "more just" as compared to the single tax rate of 13%.

On November 8, the Board of Directors of the Bank of Russia approved new amendments to the draft guidelines for the monetary policy till 2016.

On November 7, 2013, the European Central Bank (ECB) lowered their discount rate for the first time in half a year, setting it at 0.25%. The previous discount rate was 0.5%.