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INSTITUTE FOR THE ECONOMY IN TRANSITION

RUSSIAN ECONOMY: TRENDS AND PERSPECTIVES

JANUARY 2000

MONTHLY BULLETIN

Moscow

2000

© Institute for the Economy in Transition, 1996. Licence, ¹ 021018 of 09.11.95

5 Gazetny pereulok, Moscow 103918, Russian Federation

Phone: (095) 203-88-16 Fax: (095) 202-42-24 E- Mail: todorov@iet.ru

Economy and politics in January 2000 3

The State Budget 3

Monetary Policy 4

Financial Markets 7

Investment in the real sector 14

Withdrawal of licenses and dynamics of private individuals’ deposits 16

Real sector: factors and trends 19

Situation in industry 21

IET Monthly Trend Survey: January 2000 23

Situation in the farm sector 25

Foreign trade 26

Economy and politics in January 2000

Mr. Eltzin’s early resignation has become the factor, which determines the development of economic and political situation in the country during the forthcoming months.

The markets consider the forthcoming presidential elections and, accordingly, the prompter solution of the political uncertainty to be a factor which undoubtedly should have a favorable impact on the country’s economic development, which was proved by the growth in the quotations of domestic securities, both corporate and government.

The beginning of 2000 was signified by the creation of a window of opportunity for a real breakthrough in the sphere of legislation: such bills as the bill on land, Tax Code, etc., have been considered and revised by the State Duma for years, however the constant opposition of the left- wing majority to the executive branch resulted in the failure to formulate the state’s position towards the said matters which are essential for the economy. Meanwhile, the whole number of factors in place creates a unique opportunity for a real advancement with respect to the establishment of the legal framework for the multi-sectoral market economy. To such factors one can attribute, first, the pre-election intentions of the Premier which should stimulate the government’s activity. The other factor, secondly, is a powerful pro-government faction in the Duma (Unity and People’s Deputy factions) which, particularly, control the whole range of crucial committees, plus a potential support by the right forces, which allows to count on the overcoming of the leftists’ opposition.

At the same time, there is the danger of destabilization of the financial and economic situation because of the pre- election populism, though at present there are a number of factors that counterbalance the said trend. For the acting President, a high rating of the central executive power supported by regional authorities, in the first place, and, secondly, chances to further use the military operation in Chechnya as the basis for the consolidation of the nation, decrease the political significance of populism ( i.e. financial injections which allegedly increase the population’s welfare). At the same time, the alliance between Unity and its allies with the right forces in the Duma effectively could block the Duma populists’ intentions.

Th pressure of the earlier made promises to pay off backwages to budget employees, the growing military expenditures (with the military operation continuing), the failure to achieve agreements with the international financial institutions, the euphoria born by the macroeconomic success of 1999 (which became an unexpected phenomenon for the majority of the analysts) still are the factors which may generate the use of the inflationary financing policy yet in the first Quarter 2000. The results of the executive power’s performance in January do not give sufficient grounds to judge priorities of its economic policy. The mere pragmatism and clear ignorance of any ideological principles once again demonstrated by Unity during the parliamentary crisis in January 2000 do not allow the exclusion any scenarios of the further development of the situation as well.

T. Drobyshevskaya

The State Budget

Table 1


( 1998 ).

XII

I

II

III

IV

V

VI

VII

VIII

IX

X

XI

Revenue

Profit tax

2592

1061

986

2090

3264

2967

3007

2807

3937

3090

2693

5078

VAT, special tax and excises

3

3

4

268

866

1104

1087

1056

913

890

1000

Taxes on foreign trade and foreign economic activities

14811

9849

7998

9729

11375

8679

9957

11857

10345

11349

12729

12746

Other taxes, levies and payments

3714

1631

2461

3036

3001

2604

4390

4625

2825

1164

3652

4418

Overall taxes and payments

298

174

510

344

514

310

623

522

411

661

916

639

Total taxes and revenues

21416

12718

11959

15203

18423

15426

19081

20897

18574

17177

20881

23881

Non-tax revenues

11736

1645

65

2753

2621

2394

5200

3458

1377

8082

3656

4929

Total revenues

33152

14362

13383

16634

21044

18256

23854

24354

22623

22629

24534

28810

Expenditure

State administration

1388

131

503

572

627

324

491

448

454

431

526

487

National defense

5566

1562

2135

4343

3907

3606

3682

3776

3736

5619

5420

4008

International activity

530

1050

866

1496

1230

7057

1870

1911

1792

1431

687

Justice

557

17

126

119

219

115

158

195

125

147

172

169

Law enforcement activity

3408

302

1674

1645

2265

1772

1841

1245

2270

1893

2025

2467

Fundamental research

486

10

419

286

364

249

393

360

286

388

416

378

Services to national economy

3082

54

756

1101

2149

1390

1005

491

1482

1419

1246

1736

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