Modern Economics "Fight for the Future: How Not to Lose the Economy in Struggle with COVID-19" Session
The session was held with the support of the Moscow City Government. Participants discussed the most relevant topic for today: "How not to lose economy in the fight for the future and struggle with COVID-19".
Delivering his speech, Andrey Belousov, First Deputy Prime Minister of the Russian Federation, highlighted that "now the talk should be about the strategy adjusting to the times of great uncertainty." The situation with COVID-19 has overlapped with the basic unresolved problems of the world economy. In the middle of the 2000s, the balance, which generated a fast pace of world trade and triggered the world economic growth, ensuring the fast world economy development, started to collapse.
The pandemic has sharply strengthened protectionism. The statement about the necessity of commitment to the open economy and foreign trade can be reflected in all countries' rhetoric. Still, at the same time, they all reinforce barriers. This reduces the scope of possible decisions dramatically.
Social problems related to unemployment have aggravated. High unemployment rates are strictly contraindicated for Russia.
COVID-19 has changed the priorities in healthcare development as well. Substantial resources are put to the development and stabilisation of the infectious block and the modernisation of primary care.
In this context, President Putin's initiative and his decree about forming national ideas by 2030 have turned out to be really timely. These goals are basic to form strategic and operational policy.
COVID-19 has set the country 18 months back, and different spheres struggle with the situation in a different way. The most vulnerable spheres are transport, the third part of the private entrepreneurship sector, first of all, those businesses related to public services. The industry depending on the investment has faced some challanges, too. We hope to overcome this uncertainty next year".
Andrey Belousov supposes that "the significant breakthrough has been made in the digitalisation sphere in the last 6 months. First of all, it refers to the governmental services digitalisation and increasing digital usage of the range of industries closely related to the government, like healthcare and education. The next step is to fix all the achievements and start to develop them further. In general, Russia already has a formed strategy, which is reflected in the unified plan. At least, we know where to move. All that is ensured by financial, organisational, and human resources. That's why we treat the perspectives optimistically. One of the key problems is the budget problem: we should cope with a deficit of 4.4%, which is huge for our economy. We have to face the shrinkage of real costs and pay special attention to the attracting investments," the speaker noted.
According to Andrey Belousov's forecast, the COVID pandemic's situation is highly likely to finish this year. Still, its consequences will overlap next year, and it also will be quite difficult. "The decision to return to the budget rule has been made, so we should have minus 1% of the budget deficit with the present oil price in 2022. We should try to decrease the deficit of 4,4% to the point of 1%," the speaker highlighted.
He also drew the participants' attention to the fact that "due to COVID-19 Moscow has spent 250 billion rubles from its budget and sustained an equal loss in "taxes," which in sum made up 500 billion. For the Moscow region, this loss equals to 100 billion with 60 billion being direct costs. This year the federal budget has spent 4 trillion rubles to struggle CPVID-19 and has become the 'shield' which has taken the fall.".
Andrey Belousov thinks that we should have the budget deficit and the public debt level, which can ensure macroeconomic stability in any situation, a stable ruble rate, and the targeted inflation rate in the country. Social expenditure aims at decreasing unemployment, COVID-19 related payments, and money support for healthcare specialists.
The government contemplates how to support investment flow to the country and its subjects and make tax deduction work. The speaker believes that increasing investments requires creating certain comfortable conditions. If the ruble's or inflation rate becomes unstable, it will prevent investments to the country in uncertain conditions, but the dividends will be paid at best, or money will be put out of the country at the worst.
Developing the topic of the strategy adjusting, Andrey Belousov said: "For the next year, we have four main priorities in the economy. The first one is private investments. The second priority is export support. The third one is the development of small business. The fourth is the deployment of infrastructure projects that we are implementing in many regions of the country. These projects will create new hotbeds of growth for decades to come. By 2024, it is 3 trillion rubles of investments, with 300-400 billion rubles more for the roads' construction".
In conclusion, the speaker said: "I hope that we will witness stable optimistic trends in February-March 2021".
The second discussant of the Strong Ideas for The New Era forum, Moscow Mayor Sergey Sobyanin, told about the losses in certain sectors of the city's economy caused by COVID-19: "The economy of Moscow largely depends on the scenario which will take place both in domestic and international markets. The hotel sector has lost 60 % of revenue as tourist flow to Moscow from Europe and other countries has dropped to zero. Now we have no arguments to change the city development strategy. All the pandemics will pass. We will gain to the stable point in several months. Moscow's development strategy aims to create a competitive world city, and we will continue to move on". The mayor made the forecast on the city's economic development for the next year, saying that "2021 will be the tough one, it might be even tougher than the beginning of 2020. However, we will reach a normal pace of development by the end of next year."
"In comparison with this spring, now we are ready to struggle the pandemic much more. For that period of time, 8,000 additional hospital beds have been deployed, we have learnt to organise all parts of the healthcare system in an accurate and precise way. Today we succeed without imposing broad restrictions. Live and health are important for us, and this is the starting point. If we had no contact with other countries, we would base our work on our considerations. Still, we should also mind the pandemic situation in other regions of Russia and Europe. We are to make forecasts keeping in mind the international COVID-19 situation, capabilities of our healthcare system, and the fact that we are passing through pandemic during the autumn-winter period. In the forthcoming weeks, another difficult period awaits us," Sergey Sobyanin claimed.
The mayor also announced that "Moscow will borrow funds to continue the realisation of all the investment programs in 2021. All the programs related to the road, metro, railway construction, and social facilities construction will be retained. Moscow will meet 100% of its social responsibilities".
"We have enough money for that as revenues fully guarantee social payments and retaining salaries in the social sphere at the appropriate level. Due to the pandemic, Moscow's revenue loss is estimated at approximately 500 billion rubles in 2020. This year we will manage the situation; we have enough resources. The volume of the Moscow investment program equals 500 billion rubles. If all the investments are reduced to zero, then the budget will be balanced, but it means to reset the city's economy, its development, and our nearest future," explained the mayor.
The speaker claimed that "Moscow will not reduce the level of investments in the economy despite the crisis, with the second wave expected in the autumn-winter period of 2020. This strategy has been implemented during the previous crises and proved its effectiveness. Thanks to the enhancement of investments, the economy's "engine" was activated."
"In a year or two, we received the result: recovered tax base and growth dynamics. This time we will do the same again. There is no money in the budget balance. We will borrow this money and ensure the same volume of the targeted investment program as it was in 2019-2020, and even more. For every invested ruble, we will get 1-2 rubles of private funds", told Sergey Sobyanin.
During his speech at the Forum's session, Andrey Vorobiev, the Governor of the Moscow region, stated, that "this year Moscow region is to spend around 10% of the budget, in other words, 60 billion rubles on the fight with COVID-19. These funds have been used not for the construction of kinder-gardens, schools, and roads, but for purchasing personal protective equipment, medicines, payments for doctors and support for business".
The governor also noted: "Like many other Russian regions, Moscow region has limited resources and tries to provide industries with possibilities for further growth to support those prospective directions. We have seen that pharmaceutics is quite a vulnerable industry nowadays. We are happy to have smart people, and we should use this intellectual potential. We should dare to develop such a level when our pharmaceutical is capable of meeting local demand fully and allows us to export medicines to other countries not to depend on French anti-COVID 19 medicine "Actemra."
The governor considers that "this crisis should move Russia even closer to the digitalisation". "What does it mean? If you want to build a factory or a plant, all the bureaucratic processes should be digitalised to make the processes simpler and more transparent", claimed Andrey Vorobiev.
Svetlana Chupsheva, CEO of the Agency for Strategic Initiatives in Promoting New Projects, told about the trends of the projects launching during the pandemic: "In spring, when the pandemic broke out, many projects in distance-learning and social services spheres appeared. People were saying they wanted to be helpful in minimising the pandemic's consequences in different fields. This energy and the people's willingness to suggest help put their resources into overcoming the crisis that became the trigger of this process. We decided that the Forum will be devoted to strong ideas for the third millennium".
The speaker drew the participants' attention to the fact that "one of the challenges is the rising poverty of the population. According to the World Bank estimates, 88 to 115 million people in Russia will be on the edge of poverty in 2020, with the number could be as high as 150 million people next year. This means the loss in human resources caused by the remote work regime, household income decrease, and nutritional deficit. Distant learning in schools and universities is another challenge to be faced, and we should develop a mutual response to it."
A decline in the world economy's growth rate is another such challenge, the CEO of ASI believes. According to forecasts, the loss of global GDP by the end of 2020 will be equal to 5-8%. The second thing that she noticed is a decrease in labor productivity, which can reach 6%. "Of course, all these tasks are strategic for us. We are ready to accept these challenges and offer solutions. Today we can build a policy of targeted support. Technology will help us: 15,000 ideas and projects proposed by the Russians are precisely related to these problems' solutions and tasks. The authors offered certain technologies to solve them. We have organized the work in such a way that all 15,000 ideas found their destination," said Svetlana Cumsheva.
She also believes that "the Forum is just the beginning of a huge work. Our task is to ensure that all the proposed ideas and projects are implemented in practice. A strong idea should always be backed by action. The target of the ASI is to make this action happen."
The speaker suggested, "to retain deferrals on payments and maintain a moratorium on inspections of control and supervisory authorities, as this would seriously support entrepreneurs during the pandemic."
In conclusion, Svetlana Chupsheva noted that "the end of the influence of coronavirus factors on the economy can be expected only when vaccination is widespread, and it could take up to one year."