## IMF Staff Concludes Visit to Russia

_IMF News, November 17, 2017_

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## Bibliographic details
- Published: November 17, 2017

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### Mission overview and macroeconomic outlook
- Press Release No. 17/448
- Mission dates: visited Moscow during November 13–17, 2017
- Mission leader: Ernesto Ramirez Rigo
- End-of-Mission statement: views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board; this mission will not result in a Board discussion.
- Key macroeconomic findings:
  - "A cyclical recovery in Russia is gaining pace after a two-year recession, with growth expected to reach around 2 percent this year, supported by higher oil prices and easier domestic financial conditions."
  - "Growth is likely to remain low in the medium-term, due to demographics, unaddressed structural bottlenecks as well as enduring sanctions."
  - "Inflation is likely to be just under 3 percent at end-2017, but it is expected to return to around the 4 percent target soon thereafter."
  - "The current account surplus is forecasted to improve due to higher oil prices and stronger global demand."

### Fiscal policy assessment and recommendations
- Observations:
  - "The deficit reduction planned in the 2018-20 federal budget, underpinned by the new fiscal rule, is welcome."
  - Adjustment rationale: warranted due to permanently lower oil prices and the need to increase savings in the oil fund in the face of potentially volatile oil prices.
- Recommended revenue measures:
  - Improve tax collection.
  - Increase return on state assets, including dividend payout, to boost non-oil revenues.
- Recommended expenditure measures:
  - Rely on more permanent and better targeted measures, such as parametric reform to the pension system.
  - Shift to means-testing of social assistance programs.
  - Reduce subsidies and tax expenditures.
  - Conduct detailed spending reviews to create fiscal space for infrastructure and human capital investment.

### Monetary policy assessment and recommendations
- Observations:
  - "The Central Bank of Russia (CBR) has met its inflation target earlier than expected with the commendable steadfast implementation of their inflation targeting regime."
  - "Conditions are in place for further easing of monetary policy as inflation and inflation expectations have continued to decline since the last Article IV (see Press Release No. 17/270)."
- Recommendations and cautions:
  - "Further cuts in the policy interest rate should continue as the monetary stance remains tight but with due care to the potential reversal of temporary factors – low food prices and the strong exchange rate – which are partly responsible for the current low inflation."
  - The CBR’s enhanced monetary framework beyond end-2017 is welcome.

### Banking system stability and financial-sector recommendations
- Observations:
  - "The banking system appears stable, notwithstanding the recent rescue of two prominent banks and endemic weaknesses in many small banks."
  - Lending activity is increasing, supporting a recovery in bank profitability.
  - Non-performing loans (NPLs) appear to have stabilized, but asset quality remains a key weakness.
  - There are risks that provisioning may be low in some banks.
- Priority actions:
  - Strengthen the ongoing asset quality review to ensure banks’ capital basis and support market confidence.
  - Adopt and communicate a strategy to address weaknesses identified by the review and ensure transparency around the cost to taxpayers.
- Bank resolution framework recommendations:
  - The new bank resolution framework should shorten the process of open bank resolution and reduce balance sheet encumbrance, but areas of improvement remain.
  - Consider replacing the CBR’s funding with federal government funds, provide for statutory bail-in consistent with international standards, and remove impediments to purchase and assumptions of problem banks by healthy banks.

### Contact and communications
- IMF Communications Department — MEDIA RELATIONS
- PRESS OFFICER: Wiktor Krzyzanowski
- Phone: +1 202 623-7100
- Email: MEDIA@IMF.org

*IMF Staff Concludes Visit to Russia — Press Release No. 17/448, November 17, 2017*

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## References

- [Russian Federation and the IMF](http://www.imf.org/external/country/RUS/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Press Release No. 17/270](http://www.imf.org/en/News/Articles/2017/07/10/pr17270-imf-executive-board-concludes-2017-article-iv-consultation-with-the-russian-federation)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2017/11/17/pr17448-imf-staff-concludes-visit-to-russia_