Transcript of the Russia 2020 Article IV Consultation Press Briefing

IMF News, February 9, 2021

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Date: February 9, 2021.
Presenter: Jacques Miniane, Mission Chief for Russia, IMF.
Overall assessment: The economy "has shown more momentum and resilience than we expected."
Key numerical observations:
- "a contraction of 3.1% contraction in 2020," which is "less than the -3.6 percent we projected."
- Forecast for 2021: "three percent growth."
Forecast conditionality:
- Forecast is conditional on "an effective vaccine rollout" and "a substantial part of the adult population being vaccinated by the summer in Russia and in many of Russia's trading partners."
Cautionary note: "We are not out of the woods" — risks include strict lockdowns in trading partners, new variants, and uncertainties around vaccine rollouts.

2020 outturn vs. projection:
- Staff projection circulated on January 19 showed "-3.6 percent" for 2020.
- Supplement acknowledges the actual outturn of "-3.1" for 2020.
Implications for 2021:
- Higher-than-projected Q4 2020 (growth instead of contraction) implies 2021 "is going to start from a higher base."
- Staff view: "there's upside risk" to the 2021 forecast, balanced against downside risks from pandemic developments.

Authorities' stance: Desire to withdraw fiscal support if the economy continues to grow.
IMF advice:
- Urges vigilance and readiness to provide budget support if the economy deteriorates.
- Specific recommendation: "unemployment benefits are one example" — authorities "decided to extend the maximum benefit" and IMF "would like to see all unemployment benefits kept at their post-March levels for a little while longer."

Inflation developments:
- "Inflation has been running stronger than we projected," attributed largely to "one-off effects from global food prices, and one-off effects from the ruble depreciation."
- Staff view: given weak economy and transitory factors, "inflation was going to start going down after... these one-off effects die off."
Central bank approach:
- Executive Directors "generally saw merit in the wait-and-see approach of the central bank."
- Staff recommendation: there was "room for further easing" but recognition of "inflationary risks."
Q&A highlights on rates:
- Question asked about possibility of the Russian Central Bank "cutting rates this Friday" and "cutting rates by 50 basis points in coming months."
- IMF position summarized: Directors saw merit in either loosening or a wait-and-see approach; "there was no discussion at the Executive Board of raising rates."
- Mission chief: easing timing expressed as "in the coming months" rather than a specific date.

Banking sector strength:
- Banks "entered the crisis in a strong position."
- "Bank capital for the system is more than sufficient to absorb the losses."
Policy guidance to regulators:
- Request to the central bank: continue to ask banks that can set aside capital to do so without waiting until "April or June" (extended time).
- Recommendation: when the extended time frame expires, "not to renew it," because banks "are in a position to set aside capital and they should."

Pre-crisis constraints: Russia "entered the crisis with very weak growth" and "real incomes, per capita incomes in Russia are growing very slowly and are not converging to the levels of richer countries."
Structural bottlenecks to address:
- "weak infrastructure"
- "improving the business environment"
- "improving governance and the rule of law"
Views on specific initiatives:
- Regulatory guillotine: welcome, but "it remains to be seen what actual difference it is going to make to the business environment."
- "13 national projects": considered "very important," but IMF advice is they "should catalyze the private sector" and "should not be used to expand the footprint of the state."

Forecast updating:
- Report circulated on January 19; supplement included later acknowledging "-3.1" for 2020 rather than the report's "-3.6 percent."
- IMF explanation: cannot continuously modify the report before board consideration; supplement records updated outturns.
Monetary policy timing:
- Directors "generally see merit in the central bank's approach" and favored wait-and-see given current inflation dynamics.
- Mission chief's view: "discussion of raising rates at this stage seem premature" due to "significant slack in the economy" and belief that inflation effects are "transient."

Transcript of the Russia 2020 Article IV Consultation Press Briefing — IMF Communications Department, February 9, 2021.