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The Bank of Russia has summed up its operations in the domestic foreign exchange market in March 2014. The Bank of Russia sold $22,3bn and 2,3bn euro during the month.

The Russian Government has commissioned a few of public departments to prepare by April 15, 2014 their proposals on the establishment of a Special Economic Zone (SEZ) in the Crimea. Minister of Economic Development Alexey Ulyukayev stated that the Crimea might have a SEZ similar to that in the Kaliningrad Region.

Eighty five percent of Russian industrial enterprises have reported rising prices of imported raw and other materials as a result of the ruble devaluation by March 2014. A similar situation has been observed in imported machinery and equipment markets, where 81% of enterprises have reported growth in prices of the import they trace. This is the first impressive effect of planned, and maybe not so planned, ruble devaluation.

On the other day, Alexei Ulyukaev, Minister of Economic Development made public the outputs of calculations of the Ministry of Economic Development. According to the above outputs, with taking into account the current economic situation, particularly, the expected capital outflow of $60bn in the 1st quarter of 2014 (which is comparable to the capital outflow in 2013), in 2014 the economic growth rates in Russia will amount to 1.8%–1.9% as compared to the previous year.

Publication by the Federal Treasury on Wednesday, March 26, of the monthly report on execution of the federal budget in January revealed for a short period of time secrecy over federal law No. 349-FZ on The Federal Budget in 2014 and the 2015 Planned Period approved on December 2, 2013. Without the data provided in the report on complete allocations by sections and subsections of the functional classification of expenditures it is impossible to evaluate correctly the federal budget expenditures envisaged by the above law for 2014.

In addition to the downward revision by a number of rating agencies of Russia's long-term credit rating forecast, a similar move was made in respect of Russian banks and large companies.

Today, the World Bank published its report on the Russian economy in which it suggested two scenarios of economic growth in Russia in 2014. The first scenario proceeds from the fact that the effect of the situation around Crimea on the Russian economy will be short-lived and, consequently, slowdown of GDP growth rates to 1.1% in 2014 is expected, while in 2015, slight growth to 1.3% as compared to the previous period.

In 2013, the content of the privatization process in the Russian economy was determined by completion of the first 3-year forecast privatization plan (program) approved as early as November 2010 which event was preceded by approval of a large-scale package of amendments to the existing 2001 law on privatization.

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.