Government meeting

The agenda focused on the scenarios for the functioning of the economy, the key parameters of the socioeconomic development forecast and the projected changes in prices (tariffs) for goods and services of business entities in the infrastructure sector for 2025–2027.

Mikhail Mishustin’s
opening remarks

by Minister of Economic Development Maxim Reshetnikov on the scenarios for the functioning of the economy,
the key
parameters of the socioeconomic development forecast and the projected changes
in prices (tariffs) for goods and services of business entities in the infrastructure sector for 2025–2027

Excerpts from the transcript:

Mikhail Mishustin: Good afternoon,

In his Address
to the Federal Assembly, the President presented a wide range
of initiatives to support large families.

In line with his
instructions, the Government has proposed a number of amendments to the current
legislation. Now families with three or more children can receive 450,000 roubles
to pay off their mortgage.

Last year, about
190,000 such payments were made.

We are now
extending this measure for another seven years, allowing parents whose third child
and subsequent children are born before 31 December 2030 to take advantage of government assistance in purchasing housing.

In total, more than 600 billion roubles will be required additionally
for these purposes, including about 50 billion roubles this year.

The next item on our agenda is providing support to the Belgorod Region.

We thoroughly discussed this matter during the Government’s report to the State Duma. At the President’s instructions, a law has been drafted to extend the free economic zone regime to include the town of Shebekino. An additional 2 billion roubles will be allocated to support this region. Priority
will be given to people who have lost their homes, employees of small and medium-sized enterprises, and sole entrepreneurs. Industrial enterprises will
also receive funding for reconstruction, modernisation, expansion of production
capacity, acquisition of new equipment, and most importantly, preserving employment

In total, over 6 billion roubles will be allocated to the region for these purposes this year. Colleagues, I urge the departments responsible for fund allocation to ensure swift and efficient disbursement of these resources
to both individuals and businesses.

Let us move on to another issue.

The next budget cycle is beginning. Today, we will discuss the scenarios
for the operation of the Russian economy, along with the key indicators of the socio-economic development forecast for 2025, as well as the planning period
spanning 2026 and 2027.

Over the next three years, we are tasked with addressing several
systemic issues, particularly those highlighted by the President in his
Address. It is imperative to initiate new national projects and uphold the nation’s steadfast advancement toward achieving its national goals.

Despite mounting pressure, the Russian economy has been resilient in adjusting to external challenges, aligning itself with national objectives, and boosting domestic production.

As a reminder, in February, GDP growth surged to 7.7 percent. Both the mining and processing sectors experienced expansion, while consumer activity
showed signs of strengthening. Detailed discussions on various processes,
including the development of a supply-side economy, were conducted during
recent strategic sessions held at the Coordination Centre.

This overall trend has a positive impact on the federal budget
indicators. By the end of the first quarter, revenues increased by over 50
percent compared to the corresponding period last year, creating additional
opportunities for the realisation of projects that are important for the state.

The preliminary version of the forecast anticipates GDP growth of approximately 2.3–2.4 percent per annum over the next three years, driven by a rise in domestic demand.

Minister of Economic Development Maxim Reshetnikov will provide further
insights into the scenario conditions and key parameters of the forecast.

Please, Mr Reshetnikov, the floor is yours.

Minister of Economic Development Maxim Reshetnikov

: Mr Mishustin, colleagues,

As you have noted, we formulated the scenario’s
conditions and the main parameters of the forecast for the next three years
during the first stage of the budget cycle. I would like to remind you that the economy grew by 3.6 percent throughout 2023. We posted subsequent growth in early
2024. Moreover, the February statistics, mentioned by you, show that this
growth is accelerating.

Key sectors, including the processing industry, the construction sector, trade, the public catering sector, transportation and tourism, are developing rapidly. Given current trends, we are expecting the GDP
to grow by 2.8 percent in 2024. Nominal GDP is estimated at over 191 trillion
roubles or 11.5 trillion roubles more than we expected in September 2023.

The domestic consumer market and investment demand remain
the main factor of economic growth. Investment volumes are to increase by 2.3
percent this year. We have not modified the September 2023 estimate, but the 2023 base proved more substantial. As of late 2023, investment soared by a record-breaking 9.8 percent.

High consumption will persist throughout 2024. We are
expecting the real retail trade sector to grow by 7.7 percent, with commercial
services increasing by 5.1 percent. Expanding domestic production facilitates
higher consumption growth, in the first place.

Growth in incomes facilitates consumption. In 2024,
real and nominal cash earnings will increase by 5.3 percent and 12.3 percent,

Wages are the main factor contributing to higher
incomes, and we are expecting real wages to increase by 6.5 percent.

Unemployment will not exceed 3 percent.

We are expecting inflation to slow down to 5.1 percent
by late 2024. We had a 7.4 percent inflation up till the end of 2023. In effect, inflation
is subsiding.

The rouble’s average annual exchange rate is to total
94.7 roubles to the dollar. In 2025–2027, we are expecting 2.3–2.4 percent
annual economic growth, and the nominal GDP is to exceed 237 trillion roubles
by 2027.

Annual investments are to grow by an average of 3
percent, and consumption is to soar by 3.7 percent.

Real incomes of the population will grow by about 3
percent, on the average. The trade surplus will expand gradually, due to a more
rapid export increment, with imports growing more slowly. The rouble will grow
weaker in line with inflation differentials, and its real effective exchange
rate will remain stable. 

We expect inflation to reach 4 percent in line with
inflation targeting by the Bank of Russia. Risks also remain. Externally, this
is a slowdown of the world economy as a whole and the economies of Russia’s main
trade partners, as well as the continued sanctions pressure. Internal risks are
primarily related to the sufficiency of domestic supply in the context of a limited labour market. These risks are taken into account in the conservative
scenario, which, in accordance with the established order, is also presented.

The suggested basic scenario is realistic. It takes
into account all of the Government’s implemented and planned measures that the President instructed it to carry out. They include the development of the domestic industry and projects of technological sovereignty in machine tool
industry, aircraft and ship-building, microelectronics, medical technology,
energy, space and other industries; support for investment activities,
including soft lending for priority projects and sectors; active involvement of development institutes; the development of the taxonomy of technological
sovereignty projects; development
of the Project Finance Factory; applying mechanisms of promotion and protection
of capital investment, special investment contracts, private-public
partnership, and concessions, to name a few; active regional policy, including
the development of geostrategic territories; support for the regions of insufficient economic potential, and encouragement of investment activities via
infrastructure menu mechanisms.

Also, the flexibility of the labour market
is considered by active training and re-education of personnel by taking the envisaged measures – increased involvement of young people in the workforce;
removal of excessive barriers in the labour market, and increase of labour productivity wherever it is insufficient;
support for exports, primarily non-resource
and non-energy exports; the development of the transport infrastructure in general, which will improve connectivity within the country, mobility of the population and logistics of foreign trade; support for small and medium-sized
businesses and other measures related to the development
of the supply-side economics, infrastructure development and improvement of the living standards.

Mr Mishustin, I would like to suggest
approving the presented basic scenario and take it as the main one for drafting
a forecast of economic development and federal budget projections for the mid-term perspective.

Mikhail Mishustin: Thank you, Mr Reshetnikov.

No doubt, the discussion of the scenario’s terms is an important stage of the budget process. Now, proceeding
from the forecast and other no less important strategic planning documents, the Finance Ministry must draft the parameters of the budget for the next three
years in cooperation with other departments. In the process, it should consider
the required funding for national projects, state programmes and areas that the President set forth in his address. All social measures must be taken into
account for the people to receive necessary support and for the economy and industry to continue developing.

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