Siluanov: The economic cooling period must be passed smoothly
The Finance Minister announced this at the Moscow Financial Forum. He stated that the budget's goal for the next three years is to ease monetary policy. Meanwhile, Central Bank Governor Elvira Nabiullina emphasized that a balanced federal budget will allow for moderate interest rates in the economy.
Updated at 2:20 PM
The planned economic cooling period must be carried out smoothly to reduce inflation and increase Russians' real incomes. Russian Finance Minister Anton Siluanov stated this at the Moscow Financial Forum.
According to him, the goal of the budget for the next three years is to ease monetary policy. "Therefore, when we reported to the president on budget policy for the next three years, the goal was precisely for the budget to help 'easen' the current monetary policy. After all, the two instruments that influence finances are the budget and banks, through the interest rate and the fiscal stimulus," the minister said.
Siluanov also said that the budget cuts are based on oil and gas revenues. By 2030, the cutoff price will be reduced to $55 from $60, or one dollar per year.
In turn, Central Bank Governor Elvira Nabiullina, speaking at the forum, emphasized that a balanced federal budget will allow for moderate interest rates in the economy. She confirmed that the key rate will not fall as long as Russia's budget remains in deficit.
According to her, the Bank of Russia is concerned about factors hindering the economy's recovery from overheating, including the state of the labor market and its transition to balanced growth. However, she noted that the regulator sees that labor market tensions are easing slightly. Nabiullina reiterated that there is no recession, and summer data shows continued economic growth at a more moderate pace:
"Summer data shows that growth continues, yes, at a more moderate pace, and this is natural, unfortunately, after a period of economic overheating. At the same time, we're even seeing signs of increased consumer activity and demand; corporate lending is noticeably increasing, as the data shows. Perhaps this is fueling talk of a recession. The situation is difficult in certain sectors, and that's true. Some of our sectors have found themselves in a difficult situation, primarily related to external demand. We see this in the mining industry, the coal industry, and metallurgy, and we're analyzing the situation. This is due to external demand, or there's been some decline in those sectors that experienced what we call overheating."
And to increase labor productivity and economic efficiency, according to him, support is needed for effectively operating enterprises, and not for “slackers.”
Siluanov : At first glance, the answer seems simple: we need to invest more in machine tools, equipment, robots, and so on, and allocate money for them. Well, yes, I suppose that does help. But in reality, I think the issue is more profound, because machine tools, equipment, and money alone won't solve the issue of productivity and economic efficiency. It's a matter of the right incentives, the right vectors aimed specifically at increasing production efficiency. It might sound like a general term, but there's a lot to it. Because what we're doing is allocating large sums of money, R&D is being developed, technology is being purchased, but where are the results? There are no results. It turns out, you know, we're helping the slackers, not the efficient ones. We need to help those who are pulling their weight.
Nabiullina: Maybe they are effective because you don’t help them?
In turn, Moscow Mayor Sergei Sobyanin responded that if we rely on the sentiments of Elvira Nabiullina and Anton Siluanov, life will be happier. Sobyanin believes that "all recessions and crises are not just a question of interest rates, but a matter of psychology." "If you tell yourself that everything is bad, bad, bad, then it will be bad," the mayor emphasized.
Siluanov and Sobyanin also joked about drinking a glass of wine at lunch when working at peak performance. The mayor cited the example of highly productive countries like Germany and Italy, where workers can enjoy a glass of wine or beer at lunch. The joke was echoed by the plenary session moderator, Andrei Makarov, head of the State Duma Committee on Budget and Taxes.
Sobyanin : Labor productivity in Germany is 1.7 times higher than in our country. But have you seen Germans working overtime? A long break, a glass of beer, or in Italy, for that matter? It's hard for us to imagine that our Ivan Ivanovich, working in a factory, works less than those citizens who eat pizza, take a midday break, nap, and so on. Well, it's hard to imagine. We're talking about something else entirely, the high population density.
Siluanov : There's one thing I don't understand: if productivity in Moscow is like in Germany or Italy, why don't we drink a glass of wine at lunch in Moscow, Andrei Mikhailovich?
Makarov : If this is the only disagreement between you that Sergei Semenovich spoke about, it seems to me that we can now resolve this issue.
Siluanov : That is, we still work more, I guess.
The ruble exchange rate was also discussed at the forum. The head of the Central Bank believes that fundamentally it could be quite strong, but it's important to focus on the market rate, not on the Central Bank tweaking it one way or another. "When people ask me about the exchange rate, I suggest they remember that the currency market is a market," Nabiullina said. The Finance Minister, however, noted that a looser monetary policy would contribute to the ruble's weakening.
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