The government will adhere to the stated terms of its program to privatize federal property, said Deputy Prime Minister Arkady Dvorkovich, speaking at Renaissance Capital’s 16th Annual Investor Conference. The privatization program will be completed by 2017, and specific actions will be approved by the Russian government, based on recommendations from independent consultants. The speaker noted that the authorities will wait to pursue privatization if the market is unready to pay the necessary price, but assures that it will not wait more than a few months for favourable market conditions to appear. Long-term delays are only possible if Russia will face another major economic crisis similar in scales to that of 2008-2009.
In his assessment of the situation regarding oil prices, Arkady Dvorkovich said that the current budget assumes a rate of $ 115 per barrel. However, this is only the macroeconomic forecast, and the real price will most likely be lower. According to the speaker, there will be a decrease in reserves, but expenditures will not be reduced. Mr. Dvorkovich also recalled that in 2013 Russia will introduce a fiscal rule requiring the government to take into account the average price of oil over 10 years when doing its budgeting. Thus, in the coming years when calculating the budget, the government will proceed from a price of less than $ 90 per barrel, which will lead to the need for the reallocation of the reserve fund and an improvement in fiscal discipline.
According to Dvorkovich, there are two ways to optimize costs amidst a reduction in the price of oil. The first way is to reduce investment in infrastructure projects, while the second is to reduce defence spending. Both options have their drawbacks and negative consequences, and it will be a difficult choice for the government.
One of the most urgent tasks remains the diversification of the Russian economy. To this end, the government plans to channel funds into areas such as education, pharmaceuticals, and energy efficiency. Companies investing in innovative activity will be provided with preferential tax treatment. Mr. Dvorkovich expects that under these conditions, the industrial sector will be the driver of the diversification of the economy.
In response to criticism of the government and accusations of ineffectiveness, Dvorkovich noted that the transition period in the country initially took a longer time than expected in the early 90th. It took a new generation of technology and the birth of a new generation of people that were capable of accepting modernization. According to Dvorkovich, the government’s forecasts are moderately optimistic: The problem is clear, and all the necessary resources to address it are available. Russia has a functioning government, society supports the idea of modernization, and there are changes that are planned and ready for implementation. Mr. Dvorkovich added that so far there had been a failure to reach a consensus on the reform of the pension and education system, but that the government will soon make decisions on these issues.
