2 Aug 2012

IMF / RUSSIA

Russia has recovered from the global economic crisis, growing at more than four percent through 2010-11 on the back of high oil prices. Growth is set to continue at about four percent in 2012, assuming oil prices of eighty dollars a barrel. This means the economy is running at close to capacity, putting it at risk of overheating in the short term.

Posted at: August 2, 2012 8:25 am

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STORY: IMF / RUSSIA
TRT: 2.35
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / NATS

DATELINE: RECENT 2012, WASHINGTON, D.C. / FILE

SHOTLIST:

FILE – RECENT, MOSCOW, RUSSIA

1. Various shots, Red Square

RECENT 2012, WASHINGTON, D.C.

2. SOUNDBITE (English) Antonio Spilimbergo, Mission Chief to Russia, IMF:
"We currently project growth at about four percent on account of still high oil prices.  However, this is a slight slowdown with respect to last year.  And inflation will be about 6.5 percent because growth is growing a little bit above potential."

FILE – RECENT, MOSCOW, RUSSIA

3. Various shots, people shopping in outdoor market

RECENT 2012, WASHINGTON, D.C.

4. SOUNDBITE (English) Antonio Spilimbergo, Mission Chief to Russia, IMF:
"Transparency and the fight against corruption are key issues in Russia.  If Russia has to grow out of being an oil economy, it has to diversify in other sectors.  In order to diversify in other sectors, Russia has to attract investment, both domestic and international investment, but this cannot happen if there is a problem with corruption and transparency.  These issues were clear and President Putin himself on his very first day in office issued a decree outlining a plan to fight corruption and to increase transparency."

FILE – RECENT, MOSCOW, RUSSIA

5. Pan left, people shopping

RECENT 2012, WASHINGTON, D.C.

6. SOUNDBITE (English) Antonio Spilimbergo, Mission Chief to Russia, IMF:
"Well, a natural way of doing this would be to increase the payroll taxes that nowadays are about 22 percent of wages, which is already quite a high level for Russia.  If we had to keep the pension at the level which they are nowadays, we would have to increase the payroll taxes to 30 percent by 2030 and to 40 percent by 2050, which is a very, very high level, which would be very detrimental for labor and for diversifying the economy.  This is the reason why we do not recommend an increase in payroll taxes.  Rather, we would prefer to increase the retirement age, which would have also the good effect of increasing labor supply.

FILE – RECENT, MOSCOW, RUSSIA

7. Wide shot, pedestrians cross at crosswalk
8. Pan right, Red Square

STORYLINE:

"We currently project growth at about four percent on account of still high oil prices.  However, this is a slight slowdown with respect to last year.  And inflation will be about 6.5 percent because growth is growing a little bit above potential," said the IMF mission chief for Russia Antonio Spilimbergo.

There are also significant challenges over the next several years that must be dealt with if Russia is to realize its true growth potential. The government should do more to improve macroeconomic stability, which will require reducing inflation. Another key ingredient for future growth is improving the investment climate so that Russia can attract the domestic and foreign investment it needs to diversify its economy and lessen its dependence on natural resources.

"Transparency and the fight against corruption are key issues in Russia.  If Russia has to grow out of being an oil economy, it has to diversify in other sectors.  In order to diversify in other sectors, Russia has to attract investment, both domestic and international investment, but this cannot happen if there is a problem with corruption and transparency.  These issues were clear and President Putin himself on his very first day in office issued a decree outlining a plan to fight corruption and to increase transparency," Spilimbergo said.

As Russians struggle with the issue of underfunded pensions, Spilimbergo said that there are few good alternatives to raising the retirement age.

"Well, a natural way of doing this would be to increase the payroll taxes that nowadays are about 22 percent of wages, which is already quite a high level for Russia.  If we had to keep the pension at the level which they are nowadays, we would have to increase the payroll taxes to 30 percent by 2030 and to 40 percent by 2050, which is a very, very high level, which would be very detrimental for labor and for diversifying the economy.  This is the reason why we do not recommend an increase in payroll taxes.  Rather, we would prefer to increase the retirement age, which would have also the good effect of increasing labor supply," Spilimbergo said.