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The international monetary Fund (IMF) has lowered the forecast of growth of Russia's economy and urged the government to comprehensive structural reforms through the projects and increasing business activity of the private sector advised to invest the national welfare Fund (NWF) in high-quality foreign assets, keeping the budget rule unchanged.
according to the report of the IMF mission, the growth of the Russian economy is projected at 1.2% in 2019, reflecting weak statistics for the first quarter, lower oil prices and the impact of higher VAT rate on private consumption.
At the end of may, the IMF expected that growth of the Russian economy this year at 1.4%.
"GDP Growth should be supported by increased public sector spending in the context of national projects announced in 2018," writes the IMF.
growth Prospects remain modest, but investment in the infrastructure in the framework of national projects along with the increase in labour supply due to pension reforms can have a positive impact on potential growth rates.
"However, in the absence of deeper structural reforms it is expected that long term growth will be around 1.8 percent," writes the IMF.
Director of the IMF welcomed the launch by the authorities of the Russian Federation pension reforms and their plans to increase spending on health, education and infrastructure. But they are urged to control costs that they were effectively implemented and aimed at accelerating growth.
Not to touch achievements
Director of the IMF agreed that at the present time in Russia appropriate neutral fiscal policy, but in the long term, in their opinion, will require additional fiscal consolidation.
IMF agrees that the fiscal rule fiscal policy strengthens and helps protect the economy from fluctuations in oil prices, thereby contributing to its diversification.
"you Should avoid further changes to the rule, especially after a slight easing of the rules last year to strengthen its credibility," said the IMF.
Directors encouraged the authorities to refrain from quasi-fiscal activities through the national welfare Fund.
In the second half of 2020 the volume of liquid Fund can overcome the threshold of 7% of GDP, then the government has the right to invest funds of the Fund.
the CBI mentioned the decision to use liquid Foundation as proinflationary risk in the medium term.
the Chairman of the Central Bank Elvira Nabiullina said in an interview with Reuters that the regulator calculates multiple scenarios of use by the authorities of the Fund and believes the unfavorable investment of all funds in excess of the threshold of 7% of GDP, which is fully restored dependence of the economy and the ruble from fluctuating oil prices.
the IMF urged the Russian authorities to continue to invest the national welfare Fund in high-quality foreign assets.
Director of the IMF supported the continuation of easing monetary policy in Russia, given the recent inflation, and welcomed the plans of the Central Bank to maintain a cautious and controlled approach to rate reduction because inflation expectations are still not anchored.
the Central Bank in June, has resumed easing policy, reducing the key rate by 25 basis points to 7.50%, while it admitted the possibility of further declines on one of the next meetings of the transition to a neutral monetary policy until mid-2020.
Director of the IMF urged the Central Bank to Refine its communications strategy in the field of monetary policy and to continue to improve Bank supervision and regulation.
it is Also recommended to continue efforts to complete the consolidation of the banking sector.
the IMF welcomed the recent macroprudential measure of the authorities to curb the pace of growth of unsecured consumer lending, but noted that it could take further measures if credit growth would not be moderate.
Director of the IMF stressed the importance for the CBR reliable strategy for returning sanitized regulator of banks in the private sector so that it stimulated competition.
the Fund recommended to simplify the taxation of oil sector of the Russian Federation and cease to subsidize the supply of fuel to the domestic market.
the IMF advised to make social spending more targeted to a stronger influence on poverty reduction.
In structural reforms, in their opinion, priority should be given to creating a more vibrant private sector and reduce the state contribution.
Elena FABRICHNAYA. Editor Gleb STOLYAROV
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