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As bne IntelliNews reported there is currently a b oom in residential housing construction driven by the government’s highly successful mortgage subsidy programme, which is an island of prosperity and even saw an IPO of Samolet on October 29 with a $720mn valuation.
Developments in the labour market were mixed. Unemployment started to fall slightly in September and the unemployment rate was 6.3%. In contrast, real wage growth stalled as early as August, from which the latest wage statistics come from. Households' real disposable income turned sharply south in September, down by 5% that will only push down the retail sales further. Indeed, the purchasing power of Russian households is still at a lower level than a decade earlier.
What growth momentum there is will now rely more heavily on the commodity sector.
Separately the government passed the new three-year budget with a less than expected 4.4% deficit this year reducing to 2.4% next year and thereafter 1% for following two years.
This year, nominal general government revenue is projected to contract by more than 7%. The decrease in revenue would be 10% without the central bank surplus account resulting from the sale of Sberbank from the central bank to the state. Expenditure is expected to increase by 10% as the government rolls out stimulus programmes.
The main feature of this year’s budget it the MinFin is going to double borrowing to RUB4 trillion ($50bn), largely through issuing of Russian Ministry of Finance ruble-denominated OFZ treasury bills that will be used for anti-coronavirus stimulus, before falling back to circa RUB2 trillion which is the usual level of borrowing. This will lift the government’s debt from just under 15% of GDP to 20%, still an extremely modest level.
The motivation is the government is keen to preserve its reserves in the National Welfare Fund (NWF) and prefers to borrow rather than run the fund down. This is motivated partly as the NWF is seen as a strategic weapon in Russia’s economic war with the US and with Joe Biden widely expected to win the November elections Russia is anticipating a fresh round of sanctions in 2021 and more geopolitical tension.
6 RUSSIA Country Report November 2020 www.intellinews.com
