{
  "title": "IMF Executive Board Concludes 2019 Article IV Consultation with the Russian Federation",
  "publication": "IMF News, July 16, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/07/16/pr19282-russia-imf-executive-board-concludes-2019-article-iv-consultation",
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  "summary": "Executive Directors agreed with the thrust of the staff appraisal.",
  "publishDate": "2019-07-16",
  "sections": [
    {
      "heading": "Executive Board assessment and main messages",
      "content": "- Executive Directors agreed with the thrust of the staff appraisal.\n- Commended the authorities for their sound macroeconomic policy framework that helped reduce policy uncertainty and mitigate effects of external shocks.\n- Noted that despite the ongoing recovery, the medium-term outlook remains modest and called for continued strong policy efforts and comprehensive structural reforms to:\n  - accelerate potential growth,\n  - address institutional weaknesses and governance issues,\n  - strengthen the financial sector,\n  - lift productivity and investment."
    },
    {
      "heading": "Recent economic performance and outlook",
      "content": "- Output grew by 2.3 percent in 2018, driven by exports and consumption, which was supported by growth in real wages and higher labor demand.\n- Investment registered a moderate increase compared to the previous year.\n- Inflation picked up in the second half of 2018 after reaching historical lows earlier in 2018; one-off factors (ruble depreciation, food and fuel price increases) were the major drivers rather than demand pressures.\n- Growth projections:\n  - Growth is projected at 1.2 percent in 2019, reflecting a weak first quarter estimate, lower oil prices and the impact of the higher VAT rate on private consumption.\n  - GDP growth should be supported by an increase in public sector spending under the national projects announced in 2018.\n  - Inflation has begun to fall and is expected to return to the 4 percent target by early 2020.\n  - Medium-term growth outlook: absent deeper structural reforms, long-run growth is projected to settle around 1.8 percent.\n  - Public infrastructure spending under national projects and increased labor supply due to pension reform could have a positive effect on the growth rate of potential output."
    },
    {
      "heading": "Fiscal policy and public finances",
      "content": "- Directors agreed that a neutral fiscal policy stance is currently appropriate.\n- Additional fiscal consolidation would be needed in the long-term to ensure inter-generational equity.\n- Fiscal rule:\n  - Anchors fiscal policy and helps shield the economy from fluctuations in oil prices, facilitating economic diversification.\n  - Further changes to the rule, especially after the slight relaxation last year, should be avoided to firmly establish credibility.\n- National Welfare Fund (NWF):\n  - Authorities were encouraged to refrain from quasi-fiscal activities through the NWF and to continue to invest NWF funds into high-quality foreign assets.\n- Spending and revenue recommendations:\n  - Welcome implementation of the pension reform and plans to boost spending on health, education, and infrastructure; spending plans should be well-targeted and efficiently implemented.\n  - Fiscal revenue framework could benefit from tax base broadening and growth-friendly shifts in taxation to incentivize labor supply, reduce labor informality, and attract new investment.\n  - Recommended simplification of oil sector taxation and phasing out subsidies on domestic fuel consumption.\n  - Expenditure on social assistance needs better targeting to have a stronger impact on reducing poverty."
    },
    {
      "heading": "Monetary policy and financial sector",
      "content": "- Directors supported continued easing of monetary policy given recent inflation outturns.\n- Welcomed the Central Bank of Russia’s plans to maintain a careful and data-driven approach; noted inflation expectations are not yet firmly anchored.\n- Encouraged the CBR to further refine its monetary policy communications strategy.\n- Banking sector recommendations:\n  - Continue to enhance bank supervision and regulation, including strengthening asset quality reviews and reducing related-party loans.\n  - Continue efforts to complete consolidation of the banking sector.\n  - Welcomed macroprudential measure to curb unsecured consumer lending; additional measures may be needed if lending growth does not moderate.\n  - Emphasized importance of a credible strategy for returning rehabilitated banks to the private sector consistent with increasing competition among banks."
    },
    {
      "heading": "Structural reforms and governance",
      "content": "- Ambitious structural reforms are important to raise growth.\n- Priority areas:\n  - Create a more vibrant private sector and reduce the footprint of the state.\n  - Enhance competition by facilitating entry and exit for firms and strengthening the institutional architecture in which firms compete.\n- Governance and transparency:\n  - Welcomed advances in the fiscal transparency agenda; further progress needed to:\n    - report the government’s obligations under Public Private Partnerships,\n    - reduce the share of classified expenditure in the budget,\n    - strengthen State Owned Enterprise governance."
    },
    {
      "heading": "Selected macroeconomic indicators and projections (highlights from Table 1)",
      "content": "- Real GDP (annual percent change): 2016: 0.3; 2017: 1.6; 2018: 2.3; 2019 (Projection): 1.2; 2020 (Projection): 1.9.\n- Real domestic demand (annual percent change): 2016: -1.1; 2017: 3.8; 2018: 1.5; 2019: 1.1.\n- Consumption (annual percent change): 2016: -1.0; 2017: 3.1; 2018: 1.8; 2019: 1.7.\n- Investment (annual percent change): 2016: -1.2; 2017: 6.0; 2018: 0.8; 2019: 1.0; 2020: 2.2.\n- Consumer prices, period average: 2016: 7.1; 2017: 3.7; 2018: 2.9; 2019 (Projection): 4.9; 2020 (Projection): 3.9.\n- Consumer prices, end of period: 2016: 5.4; 2017: 2.5; 2018: 4.3.\n- Core CPI: 2016: 7.5; 2017: 3.5; 2018: 2.1; 2019: 4.1.\n- Unemployment rate: 2016: 5.5; 2017: 5.2; 2018: 4.8.\n- General government revenue (percent of GDP): 2016: 32.8; 2017: 33.3; 2018: 35.5; 2019 (Projection): 34.7; 2020 (Projection): 34.3.\n- General government expenditures (percent of GDP): 2016: 36.4; 2017: 32.6; 2018: 33.0.\n- General government net lending/borrowing (overall balance, percent of GDP): 2016: -3.7; 2017: -1.5; 2018: 1.3.\n- Nonoil balance (percent of GDP): 2016: -9.8; 2017: -8.7; 2018: -7.0; 2019 (Projection): -6.9; 2020 (Projection): -6.7.\n- Nonoil primary structural balance (percent of GDP): 2016: -8.9; 2017: -7.7; 2018: -6.6; 2019 (Projection): -6.4; 2020 (Projection): -6.1.\n- Ruble broad money (annual percent change): 2016: 9.2; 2017: 10.5; 2018: 11.0; 2019 (Projection): 8.8; 2020 (Projection): 7.4.\n- Credit to the economy (annual percent change): 2016: -1.6; 2017: 10.6; 2018: 9.8.\n- Total merchandise exports, f.o.b (billions of U.S. dollars): 2016: 281.7; 2017: 353.5; 2018: 443.1; 2019 (Projection): 447.7; 2020 (Projection): 451.0.\n- Total merchandise imports, f.o.b (billions of U.S. dollars): 2016: -191.5; 2017: -238.1; 2018: -248.6; 2019 (Projection): -255.7; 2020 (Projection): -264.5.\n- External current account (billions of U.S. dollars): 2016: 24.5; 2017: 33.2; 2018: 113.8; 2019 (Projection): 106.5; 2020 (Projection): 97.5.\n- External current account (percent of GDP): 2016: 6.9; 2017: 6.3; 2018: 5.6.\n- Gross international reserves (Billions of U.S. dollars): 2016: 377.7; 2017: 432.7; 2018: 468.5; 2019 (Projection): 517.5; 2020 (Projection): 551.5.\n- Months of imports (reserves): 2016: 17.0; 2017: 15.9; 2018: 16.4; 2019 (Projection): 17.6; 2020 (Projection): 18.1.\n- Percent of short-term debt covered by reserves: 2016: 422.7; 2017: 376.0; 2018: 480.0; 2019 (Projection): 519.1; 2020 (Projection): 571.9.\n- Nominal GDP (billions of rubles): 2016: 86,014; 2017: 92,101; 2018: 103,876; 2019 (Projection): 109,663; 2020 (Projection): 116,072.\n- Nominal GDP (billions of U.S. dollars): 2016: 1,283; 2017: 1,579; 2018: 1,658; 2019 (Projection): 1,678; 2020 (Projection): 1,733.\n- Real per capita GDP (2014=100): 2016: 97.7; 2017: 99.2; 2018: 101.5; 2019 (Projection): 102.8; 2020 (Projection): 104.8.\n- Output gap (percent of potential GDP): 2016: -0.8; 2017: 0.2; 2018: -0.1.\n- Exchange rate (rubles per U.S. dollar, period average): 2016: 67.1; 2017: 58.3; 2018: 62.7.\n- Oil exports (billions of U.S. dollars): 2016: 119.9; 2017: 151.6; 2018: 207.2; 2019 (Projection): 197.2; 2020 (Projection): 196.2.\n- Brent oil price (U.S. dollars per barrel): 2016: 44.0; 2017: 54.4; 2018: 71.1; 2019 (Projection): 68.4; 2020 (Projection): 66.9.\n- Urals crude oil spot price (U.S. dollars per barrel): 2016: 41.9; 2017: 53.0; 2018: 69.6; 2019 (Projection): 65.4.\n\nSource: IMF press release \"IMF Executive Board Concludes 2019 Article IV Consultation with the Russian Federation,\" July 16, 2019.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Russian Federation and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/07/16/pr19282-russia-imf-executive-board-concludes-2019-article-iv-consultation"
    }
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    "Published: July 16, 2019",
    "Executive Directors agreed with the thrust of the staff appraisal.",
    "Commended the authorities for their sound macroeconomic policy framework that helped reduce policy uncertainty and mitigate effects of external shocks.",
    "Noted that despite the ongoing recovery, the medium-term outlook remains modest and called for continued strong policy efforts and comprehensive structural reforms to:",
    "Output grew by 2.3 percent in 2018, driven by exports and consumption, which was supported by growth in real wages and higher labor demand.",
    "Investment registered a moderate increase compared to the previous year.",
    "Inflation picked up in the second half of 2018 after reaching historical lows earlier in 2018; one-off factors (ruble depreciation, food and fuel price increases) were the major drivers rather than demand pressures.",
    "Growth projections:",
    "Directors agreed that a neutral fiscal policy stance is currently appropriate.",
    "Additional fiscal consolidation would be needed in the long-term to ensure inter-generational equity.",
    "Fiscal rule:",
    "National Welfare Fund (NWF):",
    "Spending and revenue recommendations:",
    "Directors supported continued easing of monetary policy given recent inflation outturns.",
    "Welcomed the Central Bank of Russia’s plans to maintain a careful and data-driven approach; noted inflation expectations are not yet firmly anchored.",
    "Encouraged the CBR to further refine its monetary policy communications strategy.",
    "Banking sector recommendations:",
    "Ambitious structural reforms are important to raise growth.",
    "Priority areas:",
    "Governance and transparency:",
    "Real GDP (annual percent change): 2016: 0.3; 2017: 1.6; 2018: 2.3; 2019 (Projection): 1.2; 2020 (Projection): 1.9.",
    "Real domestic demand (annual percent change): 2016: -1.1; 2017: 3.8; 2018: 1.5; 2019: 1.1.",
    "Consumption (annual percent change): 2016: -1.0; 2017: 3.1; 2018: 1.8; 2019: 1.7.",
    "Investment (annual percent change): 2016: -1.2; 2017: 6.0; 2018: 0.8; 2019: 1.0; 2020: 2.2.",
    "Consumer prices, period average: 2016: 7.1; 2017: 3.7; 2018: 2.9; 2019 (Projection): 4.9; 2020 (Projection): 3.9.",
    "Consumer prices, end of period: 2016: 5.4; 2017: 2.5; 2018: 4.3.",
    "Core CPI: 2016: 7.5; 2017: 3.5; 2018: 2.1; 2019: 4.1.",
    "Unemployment rate: 2016: 5.5; 2017: 5.2; 2018: 4.8.",
    "General government revenue (percent of GDP): 2016: 32.8; 2017: 33.3; 2018: 35.5; 2019 (Projection): 34.7; 2020 (Projection): 34.3.",
    "General government expenditures (percent of GDP): 2016: 36.4; 2017: 32.6; 2018: 33.0.",
    "General government net lending/borrowing (overall balance, percent of GDP): 2016: -3.7; 2017: -1.5; 2018: 1.3.",
    "Nonoil balance (percent of GDP): 2016: -9.8; 2017: -8.7; 2018: -7.0; 2019 (Projection): -6.9; 2020 (Projection): -6.7.",
    "Nonoil primary structural balance (percent of GDP): 2016: -8.9; 2017: -7.7; 2018: -6.6; 2019 (Projection): -6.4; 2020 (Projection): -6.1.",
    "Ruble broad money (annual percent change): 2016: 9.2; 2017: 10.5; 2018: 11.0; 2019 (Projection): 8.8; 2020 (Projection): 7.4.",
    "Credit to the economy (annual percent change): 2016: -1.6; 2017: 10.6; 2018: 9.8.",
    "Total merchandise exports, f.o.b (billions of U.S. dollars): 2016: 281.7; 2017: 353.5; 2018: 443.1; 2019 (Projection): 447.7; 2020 (Projection): 451.0.",
    "Total merchandise imports, f.o.b (billions of U.S. dollars): 2016: -191.5; 2017: -238.1; 2018: -248.6; 2019 (Projection): -255.7; 2020 (Projection): -264.5.",
    "External current account (billions of U.S. dollars): 2016: 24.5; 2017: 33.2; 2018: 113.8; 2019 (Projection): 106.5; 2020 (Projection): 97.5.",
    "External current account (percent of GDP): 2016: 6.9; 2017: 6.3; 2018: 5.6.",
    "Gross international reserves (Billions of U.S. dollars): 2016: 377.7; 2017: 432.7; 2018: 468.5; 2019 (Projection): 517.5; 2020 (Projection): 551.5.",
    "Months of imports (reserves): 2016: 17.0; 2017: 15.9; 2018: 16.4; 2019 (Projection): 17.6; 2020 (Projection): 18.1.",
    "Percent of short-term debt covered by reserves: 2016: 422.7; 2017: 376.0; 2018: 480.0; 2019 (Projection): 519.1; 2020 (Projection): 571.9.",
    "Nominal GDP (billions of rubles): 2016: 86,014; 2017: 92,101; 2018: 103,876; 2019 (Projection): 109,663; 2020 (Projection): 116,072.",
    "Nominal GDP (billions of U.S. dollars): 2016: 1,283; 2017: 1,579; 2018: 1,658; 2019 (Projection): 1,678; 2020 (Projection): 1,733.",
    "Real per capita GDP (2014=100): 2016: 97.7; 2017: 99.2; 2018: 101.5; 2019 (Projection): 102.8; 2020 (Projection): 104.8.",
    "Output gap (percent of potential GDP): 2016: -0.8; 2017: 0.2; 2018: -0.1.",
    "Exchange rate (rubles per U.S. dollar, period average): 2016: 67.1; 2017: 58.3; 2018: 62.7.",
    "Oil exports (billions of U.S. dollars): 2016: 119.9; 2017: 151.6; 2018: 207.2; 2019 (Projection): 197.2; 2020 (Projection): 196.2.",
    "Brent oil price (U.S. dollars per barrel): 2016: 44.0; 2017: 54.4; 2018: 71.1; 2019 (Projection): 68.4; 2020 (Projection): 66.9.",
    "Urals crude oil spot price (U.S. dollars per barrel): 2016: 41.9; 2017: 53.0; 2018: 69.6; 2019 (Projection): 65.4.",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Russian Federation and the IMF](http://www.imf.org/external/country/RUS/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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