The Supreme Court of the Russian Federation defeated the claim of cancellation of the results of 2003 elections, filed by the members of CPRF, Yabloko, and Committee-2008, which hearing queerly delayed. Against this background once again declared itself “extraparliamentary” opposition. About 40 members of National Bolshevik Party again carried out a non-violent seizure of cabinets, this time in the RF President Administration, standing for (unusual for such party) defence of the RF Constitution, etc. This action took place concurrently with announcement of judgment to seven participants of non-violent seizure of M.Zurabov’s cabinet in August 2004, sentenced for five years to prison. This time members of Limonov’s Party were charged on article 278 (“non-violent seizure of power”) – to 20 years of imprisonment. Therefore, though demonstrating “bally show”, the National Bolshevik Party actually becomes the major opposition factor in Moscow (out of Moscow, there is limited number of them), at present the party numbers over 50 political prisoners. As regards their prospects, they are not still clear. Return to previous, relatively soft methods of counteraction in respect of “nazbolz” (in favor of such a scenario spoke, for example, V.Pligin, the chairman of the Duma Committee for Constitutional Legislation and State Construction), seems will be able to reduce the “snowballing” interest to “nazbolz” to the level of 2002-2003. Otherwise, it’s worth predicting nazbolz’ seeking to liken their activities to their incriminated criminal law articles.
Naming (many times supported by Vladimir Putin) V. Yanukovich a President of the Ukraine in conditions of mass and coarse falsification caused predicted by form but not by scale the flame of people’s indignation, in which participated hundred thousand Ukrainians. The administrative subordination vertical did not function, the courts and power structures took the opposition side. In re-election of the second round on December 26, 2004, Viktor Yushchenko became a president of Ukraine.
Without going into details of the Ukrainian policy, we may state that Ukrainians have much in common with Russians by their education, cross-cultural ties and cheap manpower, while large sector of its government property make possible for Russia to export its capital if the new President guarantees fair rules of game and immunity. Even more essential is worsening the Russia’s diplomacy image, and also frustration, for the third time in succession within one year, of a “president appointment” scenario on the territory of the former Soviet Union – after Georgia and Abkhazia.
S. Zhavoronkov Of the Course of Reforms in December In December a new short-term program “on the whole had been approved” at the meeting of the Government. Though somewhat worsened, but the latest laws had been passed from the “package of affordable housing”. At the conference devoted to five years of CSD (Center of Strategic Developments), economists discussed the prospects of economic growth and economic reforms in Russia for the years to come – and their conclusions were not encouraging.
December was “hot” in comparison with autumn months, and if not in terms of carrying out reforms, in terms of their discussion, for instance. At the meeting of the government on December 22 a medium-term program was considered, of which major innovations we had already reported in previous reviews. It should be emphasized here that while discussing the two ideologies for the first time confronted in public this year: consistently liberal (laid down by German Gref with some departures in the medium-term program) and manifestly government program, presented by the premier and his advisers. Despite the fact that the premier temporary retreated, it is too early to say of victory in dispute. Very likely, and this is the most disturbing result of flared up confrontation, the medium-term program will still be adopted, but, as repeatedly occurred in the expiring year, the premier, who did not consider the program “his own”, will try to “slow down” the course of reforms. If such trend of developments will take place, everyone will lose – Gref, Fradkov, and what is more important – the country’s economy.
Dynamics of the economy of the end of 2004 demonstrates what is happening in the country where the economy is not fully reformed, and the reforms are, in fact, stopped. You may argue and talk much about the effect of the course of reforms on the growth of GDP – It’s more more than one year the economist try, using different data files, to give a single-valued (having a single meaning) answer, but, so far, their answers are contrary. But today it is clear already that even signs of the abortion of reforms may impact the dynamics of the economy, and if these are accompanied with certain actions (in the sphere of redistribution of property, additional charge of taxes, etc.) or inaction (as regards the Government taking key solutions in economic sphere) It is not improbable that stagnation of economy may be the result.
The first signs of such stagnation had already been appeared, and this was clear from the report of the chief economist of the investment company Troika Dialog, Evgeny Gavrilenkov, at the conference devoted to five years of the Center of Strategic Developments.
At that conference the CSD head of research, Mikhail Dmitriev (the former deputy of the minister of the Economic development and trade) provided a comprehensive analysis of the cause and effect of the reform slowdown. The conclusions of both reports, to put it mildly, are pessimistic. It is clearly said in the first report that stagnation had already begun, and it is interesting that it was triggered as the result of signals of stoppage of the reforms and strengthening redistribution activities on the part of the State. In the second – one should not expect acceleration of reforms in the near future, if a number of fundamental decisions in “noneconomic” sphere – law-enforcement and judicial system reform, administrative reform, in the sphere of democratization of the process of policy formulation and implementation, establishing and support of the civil society institutions - will not have been taken. But, as the events of 2004 show, the State is not yet ready to take such decisions.
Against this background the final positive event in the expiring year was adoption of the main body of laws from the “housing package”, including the Housing and Town Planning Codes. Though, there was also, in this case its own (and, unfortunately, not small) “fly in the ointment”. First, several important laws still left unadopted (for example, on the real estate tax). Second, a number of significant measures were not best “corrected”: for example, a transitional period was set before full introduction of auctions (which, most likely will lead in the next nine months to distribution of the finished for construction sites among the companies close to the cities’ administrations compliant to absolutely non-transparent procedures, which will not lead in the short term to reduction of prices of housing under construction). The personal responsibility of the chief engineer and chief architect for the quality of construction had also been excluded, the attempts failed to overcome considerable reduction of the volume of expertise.
Nonetheless, adoption of laws concerning creation of the market of affordable housing is almost the only reform that seriously advanced in 2004.
It remains to hope that the following year will be more fruitful, in this respect – advancement will have to be happened, at last, in the sphere of natural monopolies reform, the medium-term program (which provides for enactment of over 100 laws!) will start to be implemented. In this regard, the beginning of the year will hardly be indicative because of 10-day holidays for the whole country (another factor for reduction of GDP growth rates), but even in March we will clearly see “which way the wind blows”.
O. Fomichev Budgetary and Fiscal Policy By the end of November of 2004, the level of revenues of the RF federal budget has increased by 0.3 p. p. of GDP in comparison with the figures registered in the preceding month and made 20.5 per cent of GDP. The level of expenditures of the federal budget increased by 0.4 p. p. in comparison with the figures registered last month and made 16.9 per cent of GDP as on December 1, 2004. In January through October of 2004, the revenues of the RF consolidated budget made about 32.0 per cent of GDP, while the expenditures of the RF consolidated budget over the respective period made 25.9 per cent of GDP.
According to the estimates presented by the RF Ministry of Finance, the amount of the RF Stabilization Fund, as adjusted for the transfers from balances of accounts after the execution of the federal budget in 2004, may make Rub. 600 billion as on February 1, 2005.
The State of the Federal Budget In January through October of 2004, the revenues of the federal budget (cash execution) made 20.per cent of GDP, while expenditures made 15.1 per cent of GDP (see Table 1). Therefore, the federal budget surplus made 4.8 per cent of GDP.
Table The monthly execution of the federal budget of the Russian Federation (in % of GDP4, cash execution).
X`03 XI`03 XII`03 I`04 II`04 III`04 IV`04 V`04 VI`04 VII`04 VIII`04 IX`05 X`Revenues 1.3% 1.3% 1.3% 0.9% 0.7% 1.2% 1.4% 1.3% 1.3% 1.3% 1.3% 1.2% 1.2% Profit tax. 2.7% 2.6% 2.7% 2.2% 2.6% 2.8% 2.9% 2.9% 2.8% 2.8% 2.8% 2.7% 2.6% Income tax. 6.6% 6.6% 6.6% 7.9% 6.6% 6.2% 6.4% 6.5% 6.3% 6.5% 6.5% 6.4% 6.4% Unified social tax. 1.9% 1.9% 1.9% 2.3% 1.8% 1.4% 1.2% 1.1% 1.0% 0.9% 0.8% 0.8% 0.8% Taxes on goods and services. License and registration dues. 3.3% 3.4% 3.4% 3.6% 4.2% 4.4% 4.7% 5.0% 4.9% 4.9% 5.0% 4.9% 5.0% VAT 1.8% 1.9% 1.9% 2.4% 2.6% 2.4% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% Excise taxes 2.9% 2.9% 3.0% 2.3% 0.1% 0.2% 0.2% 0.1% 0.1% 1.0% 0.2% 0.2% 0.2% Taxes on foreign trade and foreign economic operations. 20.5% 20.5% 20.7% 21.6% 18.7% 18.6% 19.3% 19.5% 19.0% 20.1% 19.1% 18.7% 18.6% Other taxes. 1.4% 1.3% 1.3% 0.9% 0.8% 0.9% 1.0% 1.1% 1.5% 1.4% 1.5% 1.4% 1.6% Tax revenues. 19.4% 19.3% 19.4% 20.4% 19.6% 19.7% 20.4% 20.6% 20.6% 21.6% 20.6% 20.1% 20.2% Non-tax revenues. 0.4% 0.4% 0.5% 0.2% 0.3% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% Total revenues. 2.5% 2.5% 2.7% 1.7% 2.2% 2.6% 2.9% 2.7% 2.6% 2.6% 2.5% 2.4% 2.4% Expenditures 0.2% 0.2% 0.2% -0.1% 0.2% 0.2% 0.3% 0.3% 0.3% 0.3% 0.3% 0.2% 0.3% Public administration. 0.2% 0.2% 0.2% 0.1% 0.1% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% National defense. 1.7% 1.7% 1.9% 1.0% 1.5% 1.7% 1.9% 1.8% 1.8% 1.8% 1.8% 1.8% 1.7% International activity. 0.3% 0.3% 0.3% 0.1% 0.1% 0.2% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% 0.3% Judicial power. 0.9% 0.9% 1.1% 0.2% 0.4% 0.5% 0.6% 0.6% 0.7% 0.7% 0.7% 0.7% 0.7% Law enforcement and safety measures. 2.1% 2.1% 2.3% 1.4% 1.7% 1.9% 2.1% 2.1% 2.1% 2.1% 2.0% 2.0% 2.0% Fundamental scientific research and technological development promotion. 1.8% 1.7% 1.7% 1.0% 2.1% 2.2% 1.7% 1.5% 1.4% 1.4% 0.3% 1.5% 1.4% Public services rendered to national economy, including : 6.8% 6.8% 6.9% 5.2% 5.8% 5.9% 6.5% 6.4% 6.1% 6.1% 7.4% 5.8% 5.8% Social services. 16.8% 16.7% 17.7% 10.8% 14.4% 15.8% 16.8% 16.3% 15.9% 15.8% 15.9% 15.2% 15.1% National debt service 2.6% 2.6% 1.7% 9.6% 5.2% 3.8% 3.6% 4.3% 4.7% 5.8% 4.7% 4.9% 5.1% Other expenditures -0.1% -0.3% 0.5% -8.6% -3.1% -1.2% -1.3% -2.4% -3.1% -3.2% -2.9% -3.3% -3.3% Expenditures and loans less repaid loans -2.5% -2.3% -2.2% -1.0% -2.1% -2.6% -2.3% -1.9% -1.6% -1.7% -1.8% -1.6% -1.5% Surplus -2.6% -2.6% -1.7% -9.6% -5.2% -3.8% -3.6% -4.3% -4.7% -4.9% -4.7% -4.9% -4.8% в % ВВП; ** ЕСН включен в налоговые доходы As compared with the figures registered in January through October of 2003, the budget revenues increased by 0.6 p. p. of GDP in the respective period of 2004, while expenditures decreased by 1.7 p.
p. of GDP and budget surplus respectively increased by 2.2 p. p. of GDP. As before, VAT accounted for the major share of federal tax revenues – 34.1 per cent of the total tax revenues, what was by 2 p.
p. above the level observed in the respective period of 2003. The major factor behind the increase in the amount of revenues of the federal budget in 2004 in comparison with the figures registered in was high oil prices and a respective growth in the revenues generated by taxes on foreign trade and external economic operations, as well as the increasing revenues from the Mineral Extraction Tax.
Thus, in January through October of 2004, the amount of revenues generated by customs duties made about 5 per cent of GDP, what was by 1.7 p. p. above the level of this indicator observed in the respec Because of the estimated data on GDP, the indices may be subject to revision.
tive period of the preceding year. At the same time, the revenues of the federal budget from the Mineral Extraction Tax increased by 0.7 p. p. of GDP.
According to preliminary estimates, the cash execution of federal budget revenues made 20.5 per cent of GDP in January through November of 2004, what was by 1.2 p. p of GDP above the level of revenues observed in the respective period of the preceding year. At the same time, the cash execution of expenditures made 15.5 per cent of GDP (16.7 per cent of GDP in January through November of 2003); therefore, in the first ten months of this year, according to preliminary data, the surplus made 5.0 per cent of GDP.
According to the preliminary estimates of the Finance Ministry, in terms of fulfilled funding5 the expenditures of the federal budget in January through November of 2004 made 16.9 per cent of GDP (see Table 2), while in the respective period of 2003 this indicator was at 18.1 per cent of GDP. In January through November of 2004, the amount of revenues of the federal budget increased by 1.2 p.
p. of GDP in comparison with the figures registered in the respective months of 2003 and made 20.per cent of GDP. Therefore, the surplus of the federal budget in terms of fulfilled funding in January through November of 2004 increased by 2.3 p. p. in comparison with the figures registered in January through November of 2003 and made 3.6 per cent of GDP.
Table The monthly execution of the federal budget of the Russian Federation (in % GDP, fulfilled funding).
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