Page 9 - RusRPTMay20

announced by the president). The scenario with active measures of the state includes:
· the already announced reduction in insurance premiums for small businesses from 30 to 15% (loss of income of social funds will amount to RUB300bn in 2020);
· the formation of an anti-crisis fund in the amount of RUB300bn for 2020 (and another RUB200bn in 2021);
· reallocation of part of previously approved federal budget expenditures (RUB400–500bn) to support industries and maintain employment;
· fulfillment in full (including at the expense of funds that will go to the budget from the Central Bank as part of a transaction to sell to the Sberbank government) all the promised presidential measures for social support of the population;
· an increase in budget expenditures by RUB1 trillion through the use of additional oil and gas revenues of the NWF listed in it according to the results of 2019;
· an increase in the total regional budget deficit to 0.5% of GDP (about RUB550-600bn) in order to provide regional support for small and medium-sized businesses.
In addition, monetary stimulus measures will be required: the Central Bank will have to refrain from raising the key rate, maintain a low cost of government borrowing in the domestic market (due, in particular, to re-establish the institution of primary dealers in the government bond market), and take additional measures to reduce the volatility of debt rates companies - in particular, to prevent cash gaps and technical defaults among large system-forming players. Such a policy may lead to a jump in inflation in 2020, but it will be temporary (7.5–8%), and subsequently inflation will fall rapidly.
The volume of fiscal incentives offered by the centre looks realistic: 2.4–2.5% of GDP is the amount of state support comparable with the incentives that countries such as France, Italy, and Spain are now allocating to combat the consequences of the pandemic. Germany decided to allocate more than 4% of GDP. The United States directs a record 10% of GDP to fight the virus and the economic impact. The head of the Accounts Chamber, Alexei Kudrin, proposed allocating at least 5% of GDP to combat the crisis in Russia, but this figure seems to be overestimated in the face of low oil prices and the government’s desire to preserve foreign exchange reserves.
To date, the Russian government has reserved RUB1.4 trillion to combat the crisis. (about 1.3% of GDP), said Prime Minister Mikhail Mishustin. Most economists believe that this amount of fiscal support is not enough; it is small by the standards of other countries.
In a scenario with an active anti-crisis policy, unemployment at its peak in 2021 will be able to be contained within 5.5–5.8% (now about 4.6%), after, which it will be intensively reduced.
2.2 ​ ​New OPEC ++ 10mn bpd production cut agreed
A new production cut deal was agreed on April 14 between OPEC, Russia, US and many of the other major oil producers to cut 10mn barrels per day from production to support prices. But when markets opened on Monday traders were not impressed and oil prices fell back to around $20/bbl. The traders believe the cuts are not enough to make up fro the fall in demand and also that the parties to the agreement will not stick to the agreed quotas.
After four days of talks the OPEC+ countries finally signed a historic agreement to limit production to 9.7mn bpd. That means a total of 19–20mn
9​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com