The participants discussed the situation on the financial market, in particular, the ruble’s exchange rate fluctuations, executing the budget and the anti-crisis measures the Central Bank is taking in the banking sector.
The meeting also discussed the work of the Government’s anti-crisis commission, which was set up to coordinate the federal, regional and local authorities and various organisations in carrying out the country’s import replacement policy.
President of Russia Vladimir Putin: Good afternoon, colleagues.
Let us discuss certain current matters, and one major issue – we will get to this – that will be considered at other venues, without the Government’s direct involvement.
Let us begin with the Eastern Economic Forum. Mr Trutnev is in charge of the preparations. The forum is scheduled for September 3–5. Go ahead, please.
Deputy Prime Minister, Presidential Plenipotentiary Envoy to the Far Eastern Federal District Yury Trutnev: Mr President, colleagues,
We initially planned for 1,000 participants and proceeded from the idea that we need people, rather than scale.
Currently we have some 4,000 applications, 1,470 of them from foreign participants. We are now working with the delegations individually, to make sure that everyone receives fair treatment, but at the same time ensuring we preserve the forum’s format. These are 24 countries, and the largest delegations will come from China, Japan, Korea, Singapore and Malaysia. We have accredited 660 journalists.
We have enough to tell the participants: over the past year, eight priority development areas have been created in the Far East, the ninth has been listed recently – a tourist and recreational area in Kamchatka. A decision has been made to provide infrastructure support to six investment projects, and the Far East Development Fund has become operational.
The decision has been approved to fund the first three projects, including the Nizhneleninskaya – Tongjiang railway crossing. The law On the Free Port of Vladivostok has been passed and is to come into effect on October 12. Work has begun and we believe that its results will make it possible to say that a new competitive investment space will have been created in the Far East for investment in the Asia-Pacific countries.
Vladimir Putin: Good. Could you repeat the number of expected participants, please?
Yuri Trutnev: We cannot accept more than 1,000, everything has been designed for 1,000 people, but we have 4,000 applications, with 1,500 foreigners alone.
Vladimir Putin: Good. Thank you.
We are aware of the situation on the Asian stock markets and the international financial currency markets, and the situation with oil prices. All of this has its effect one way or another on our financial market. I would like Mr Siluanov to comment on these developments and give his assessments.
Finance Minister Anton Siluanov: Indeed, Mr President, in the past days we have seen greater volatility on the world financial and commodities markets. We see that stock markets have gone down by about 10 percent, prices of raw materials have also gone down, there has been a weakening of currencies, especially those of the developing countries and especially those that export primarily raw materials. The national currencies of those countries have lost 5 to 15 percent.
The reason, of course, is the increasing unpredictability of the Chinese economy’s growth. The Chinese economy is currently one of the major economies influencing world demand, including demand for raw materials. Among such reasons, we also see the overproduction of oil; there are constant excessive volumes of oil being produced, while demand is not growing at the rate that was expected earlier. We are also witnessing pressure on financial markets, expectations of increased rates from the Federal Reserve System, which, as we know, may lead to a withdrawal of capital from developing markets.
The drop in oil prices is undoubtedly having the greatest effect on the Russian financial market. During the past month, the prices went down by some 20 percent, about 10 percent in the past week alone. This inevitably had an impact on the financial market of the Russian Federation: the ruble lost about 10 percent, just as many other currencies in countries, as I have said, with developing economies; the stock market here has dropped by about 15 percent since early August.
We have already witnessed a similar situation with the exchange rate early this year, but a rise in oil prices then led to a strengthening of the ruble. We should not rule out a repeat of this development. However, analysts dealing with the oil market say the oil price drop may be long term and we need to prepare for such a possibility and work to ensure financial and budget stability.
Of course, Mr President, we will comply with all our budget commitments for this year. This year we will need to use the reserves that we have accumulated, but these reserves are not unlimited, and for next year and the following budget cycle we have to align our commitments with the new macroeconomic situation. The Government is currently working on such proposals and we will present them for your consideration.
Vladimir Putin: Ms Nabiullina, would you like to add anything?
Central Bank Governor Elvira Nabiullina: Overall, I agree with the assessment provided by Mr Siluanov, but I would like to say that the key factor affecting the ruble, which is the price of oil, is volatile. We have already seen this year that it can go up and down: this year alone there was a period when it grew by 23 percent and then dropped by 38 percent. Therefore, we can expect change any minute.
True, our financial system is part of the global system and is not protected from all the existing risks. However, we modelled various scenarios well in advance, knowing that a pessimistic one is possible, so that we could prepare. Thus, for instance, whenever possible we increased our gold and currency reserves to create a long-term basis for our financial stability and to strengthen our safety net.
We have introduced currency refinancing mechanisms. We envisaged a $50 billion limit on loans to banks to avoid excessive pressure on the currency market. We have spent $34 billion of that reserve, and we believe that the remaining $16 billion would be enough. At the same time, we decided that we would not refinance these amounts for banks that have used up their annual limits so they feel more comfortable.
Moreover, we have decided to loosen bank regulation to allow our banking system to adapt. We have curtailed a number of measures because the banks did not need them, and were planning to discontinue more as of October 1. However, now, depending on how the situation is going to develop, we are ready to retain those measures with certain modifications.
The main thing now is for the exchange rate fluctuations to have a minimal effect on prices. I mean that after the drop in the exchange rate early this year we managed to get inflation under control. For 16 weeks, weekly inflation was about 0.01 percent, with the exception of the week when we had our traditional rate increase. Therefore, we will continue in the same way to ensure a further drop in inflation.
Vladimir Putin: Good. Thank you.
Mr Dvorkovich, has the Import Replacement Commission begun work?
Deputy Prime Minister Arkady Dvorkovich: Yes, pursuant to the law that was passed in July, the Government has set up a Commission headed by the Prime Minister. It held its first meeting to establish Commission procedures, some of which are temporary because the law will come into full effect on some of the Commission’s powers only next January. After that, we will adjust some of these procedures.
Two sub-commissions are to be set up: one headed by Mr Rogozin [Deputy Prime Minister] to deal with the defence industry and import replacement in these areas; the other one headed by me will deal with civil branches of the economy. These sub-commissions are to be set up by September 1, in the next few days.
At its first meeting, the Commission considered import replacement in the agro-industrial complex. Work has been launched in this area and plans were adopted last year, and we already have certain results. Nevertheless, this requires constant coordination and we have passed some additional resolutions.
Work in the defence industry was launched about 18 months ago. In this area, the new sub-commission will enhance coordination of efforts on implementing the appropriate plans in specific import replacement areas.
As for the civil branches of the economy, we have approved around 20 plans, which are very detailed and cover every position in specific areas, including pharmaceuticals, where we have had significant progress. In other areas work on the plans is only beginning. The Industry Ministry, the Energy Ministry, the Transport Ministry and the Communications Ministry are all coordinating this in their appropriate areas.
The sub-commissions are to align the actions of the various state agencies and the companies that are implementing projects and have a demand for certain goods. This is in the focus of the Government’s attention.
I would like to stress that we are talking about creating goods which will be competitive not only in Russia, but on the world markets as well – this is the point of all these efforts. We have specific targets and we intend to achieve them.
Vladimir Putin: We must ensure that the commission does not just take token measures. The work must be filled with very specific content.
Arkady Dvorkovich: The main changes that are to be introduced as of next January deal with the coordination of investment projects and purchasing within these projects to ensure that the companies that are implementing the projects prioritise goods produced in Russia. We are preparing for this.
Vladimir Putin: Right, and the tasks you have set should not be general, but very specific.
Arkady Dvorkovich: These are all very specific things.
Vladimir Putin: Good. Thank you.
Russia has won the right to host the 2019 WorldSkills International Competition. Ms Golodets will provide her comments.
Deputy Prime Minister Olga Golodets: Mr President, colleagues,
Acting on your instructions, Mr President, Russia submitted its application to host the WorldSkills Competition – a world championship in professional skills, in 2019. The competition was quite fierce, because Russia proposed Kazan as the venue, and it had to compete with Paris, France, and with Charleroi in Belgium. That made the victory even sweeter: of the 57 votes, 31 were cast in favour of Russia, which speaks of a high level of trust for this country in the current geopolitical situation.
I would like to note that at the same time we won six medals for professional skills. Our team was new to these competitions; we had 32 people taking part in the WorldSkills Competition in Sao Paolo, Brazil. Our team was best in such skills as cooking, electrical installations, restaurant service, hairdressing, IT network systems administration and mechatronics.
We have already begun preparing for the 2019 competition. We had a meeting and are preparing to set up an organising committee. Everything will be ready, and I hope this movement will contribute to restructuring the Russian economy and the import replacement programmes, because it focusses on the quality of work and the quality of professional training.
Vladimir Putin: We do need to prepare for 2019 and host this event properly, but we must also prepare and hold similar national and regional events.