Russia Economic and Financial Policy

The process of macroeconomic consolidation initiated by the government authorities since the early years of the millennium continued throughout 2005 and, despite a pro-cyclical fiscal maneuver, both federal and consolidated public spending remained stable. The monetary policy adopted by the Central Bank was aimed at containing inflationary pressure and moderating the appreciation of the ruble, with the aim of preserving the competitiveness of the national manufacturing industry. As regards structural reforms, after a pre-electoral period characterized by an acceleration of interventions aimed at promoting the dynamics of the free market, the government has adopted policies that have accentuated the active role of the state in the economy.

In particular, in 2006 the health, education, construction and agriculture sectors were indicated as priority areas for public intervention and a specific investment fund was set up to finance mixed public / private stimulus partnership projects. for socio-economic development, such as the creation of infrastructures of national importance, the innovation of the technological system and the improvement of the efficiency of institutions. During this period, new economic areas of particular interest were also defined and the previous ones identified in the 1990s abolished, in order to effectively direct economic support in favor of productive diversification and innovation. In the meantime, the presence of public enterprises in the economy has strengthened in the strategic sectors of energy plants, aviation, oil and finance. In 2008, with the onset of the international crisis, the deterioration of domestic economic conditions and the escalation of the conflict with Georgia, the Russian authorities took immediate large-scale measures. In particular, the government and the central bank intervened to support the financial sector, defend the ruble and implement expansionary fiscal policies. The banking system was therefore subsidized with new capital and liquidity in rubles was increased in order to contribute to a gradual depreciation of the national currency against the dollar and the euro.

Other temporary interventions on the expenditure side have been made, such as the increase in unemployment benefits and the provision of transfers to families, regions and social security funds, while public investments have been reduced.

In this period, the government has acted by altering market dynamics by providing businesses and households with subsidies aimed at limiting interest rates, financing large industries and supporting the national automotive sector. Since the second half of 2010, the monetary authorities have adopted a restrictive policy to cope with inflationary pressure by removing some of the measures introduced during the crisis to favor credit dynamics. In 2012, a provision was passed in which the newly appointed government set the long-term priorities of economic policy, with reference to improving the structure and functioning of the free market. In particular, in order to increase investments in fixed assets, to support the growth of labor productivity and to develop the high-tech industry, new rules have been defined on the use of proceeds from the oil sector, a commitment has been declared to simplify bureaucratic burdens and reduce barriers administrative burdens on businesses, the reform of the public sector was initiated with the privatization of numerous small businesses in non-strategic sectors, the divestment of some shareholdings and the replacement of the top management of public companies to reward the best professionals. New vigor has been attributed to the fight against corruption and a series of measures have been adopted in order to improve the quality of public governance. In this period, the structural interventions have been oriented towards the development of an adequate transport system, placing investments in the sector as part of a long-term strategy. Despite the fiscal tightening, in 2013 there was a sharp deterioration in public finances attributable to new geopolitical tensions, the decline in non-oil revenues and the limited revenues deriving from privatizations. Finally, in 2014, following intensified pressure on the ruble, monetary authorities intervened to temporarily reduce exchange rate flexibility.

Russia Economic and Financial Policy