Russian Economy in 2016: Outcomes, Achievements and Concerns

The article is devoted to the analysis of macroeconomic trends and monetary and fiscal policy in the Russian Federation in 2016. The data show that the economic downturn has softened and inflation has decreased, but investment in fixed assets has been low due to a decline in aggregate demand and corporate income, while real disposable incomes continue to decline for the second year. International factors continued to be unfavorable because of a drop in export prices for most Russian goods. The volume of imports began to recover after a sharp decline in 2015 due to the high dependence of the economy on imported goods and the strengthening of the ruble. The decline in the share of oil and gas in total exports has softened the sensitivity of the Russian economy to the vagaries of the world market. A radical reduction in the outflow of capital and external debt led to the strengthening of the ruble and the mitigation of inflationary expectations. All this allowed to mitigate monetary policy in order to reduce interest rates and stimulate economic recovery. Nevertheless, real interest rates continued to grow, which hampered investment and economic growth. The banking system continued to increase its resources and lend, despite all the shocks of the past two years. But the quality of loans has not improved, and liquidity has decreased, which can create problems in case of new shocks. Due to a reduction in revenues and rising costs, the consolidated budget deficit continued to grow and exceeded 3 % of GDP at the end of 2016. The government is looking for a solution to the problem through borrowing from sovereign funds, as well as in domestic and foreign markets and through privatization.