Page 20 - RusRPTSept21

· A lump-sum payment of RUB15,000 to all members of the military and law-enforcement agencies, including trainees. Moreover, Putin asked the government to index their salaries above the inflation rate over the next two years.
· Another RUB45bn to renovate older residential buildings.
Putin reiterated that banks must return the social payments withdrawn from their customers’ accounts for loan payments, as well as insisted on securing such payments from withdrawals.
Finally, Putin praised United Russia’s efforts and encouraged the party to continue working towards its targets.
On a separate note, former prime minister and current United Russia party leader Dmitry Medvedev expects the party to win a majority in next month’s elections. He also floated the idea of an annual raise in the minimum wage.
According to Minister of Finance Anton Siluanov, the one-off payments to pensioners and members of the military and law-enforcement agencies will amount to nearly RUB500bn, which should come from additional non-oil revenue (RUB1.6-1.7 trillion).
Overall, the government continues to shift its policy towards more redistribution, along with additional support for the most vulnerable social categories (e.g. pensioners and low-income families) to reduce inequality. Increasing Russia’s economic potential via an infrastructure stimulus remains key. While we note that payments to pensioners and members of the military and law-enforcement agencies are likely to occur, the proposed indexation should be seen as a pre-electoral promise, although it should happen in the lead-up to the presidential election in 2024.
Yesterday’s proposals would increase social spending vs. Putin’s speech over the weekend and could result in higher inflationary pressures in the mid-term. On our estimates, the one-off measures could add 0.25ppts to headline inflation in 3Q21, resembling the impact of the RUB5,000 payments to pensioners in 2017.
Importantly, while the non-oil fiscal balance held back Russia’s economic recovery and extracted additional revenue from the economy, the
20 RUSSIA Country Report September 2021 www.intellinews.com