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Published: January 21st, 2015

On Saturday and on Monday I participated in meetings with the Prime Minister. The first was devoted to agriculture, the second — to industry.

The feelings are not very good.

AGRICULTURE

Medvedev opens: all is going well, good harvest, we have become self-sufficient in many positions, but time is not easy, let’s discuss what to do.

Arkady Dvorkovich: the main problem is high loan rates. We will subsidize rates, so that farmers receive loans at 10% per year. We will give money to support the modernization of the village, for example, we will add money to the program 1432. The bread rises. We will fight with this. We have restricted grain export. However, not all farmers hurry to sell grain. We will limit subsidies for regions where surplus has accumulated (e.g., Krasnodar region).

Representatives of branches: Yes, cost of credits is very important, but loans are simply not given to farmers. We need more subsidies, we need to support export.

I: the past year was relatively not bad, but the forecast for the coming year is difficult to build.

Firstly, interest rates is the matter of concern, of course. The policy of the Central Bank is incomprehensible. High key rate undermines competitiveness. Enterprises are offered money for 25%. It is beyond profitability.

Next. The embargo on grain export. It is a double-edged sword. It is not good for grain producers, It is not good for manufacturers of combine harvesters as well. We hope that the embargo will not last long.

The positive effect from the devaluation of the rouble starts to leave. Thus, metal manufacturers increase prices at the rate 10–15% per month. Other materials, components and energy carriers rise in price as well. This increases the cost of equipment.

In addition, under the terms of the program 1432, builders of agricultural machinery can raise prices not more than 7% this year. The metal has risen 2 times during the year. It is difficult for us to sustain this limitation.

We ask to return loans value at least to the level of the previous year (key rate of 5.5%), to allocate 2.1 billion on the program 1432, to allocate 2 billion to Rosagroleasing on the development of export programs.

These measures will allow us to live in the new year.

But of course, as you, Dmitry Anatolievich, recently said at the Gaidar forum, a new development model is needed. We need to change the Central Bank policy, to lower taxes, to lower prices for raw materials on the domestic market by a tax maneuver, to organize an effective export support. Such signals, indeed, could attract investments into economy.

Nabiullina: the situation is difficult, I don't see any money to increase subsidies, there are no conditions for reducing the rate, I will explain for those who does not understand the Central Bank's policy by high key rate we fight against inflation.

Siluanov: the budget is formed, it is not possible to change it greatly, do not count on significant support.

INDUSTRY MEETING

Medvedev: It is not an easy time, it is necessary to continue development. Let’s discuss.

Manturov: credit rates. It is necessary either to reduce or to subsidize. To support the program 1432. To increase the state order. To adjust state programs quickly.

Industrialists: credit rates. We cannot live with such ones. Banks were given trillion roubles. It would be good to prohibit banks that received support to raise rates. Metal rises in price disproportionately.

I: credit rates. The Central Bank told us that it is fighting with inflation by high rates, but because of expensive loans costs increases, prices rise, inflation increases. It would be good if the key rate decreased.

At the meeting on agriculture development program 1432 was mentioned. But in the draft protocol this decision was not included. Please, include.

Metallurgists: we have difficulties too.

Gref: due to the devaluation the capital of banks has declined. Our ratings are reduced, so loans become more expensive, further reduction may require early repayment of the loans. Some partners refuse to cooperate.

Nabiullina: There is no money, there are no conditions to reduce the key rate. It would be unsuitable for the market to limit the margin of the banks that received state support. Adjust to new realities.

Siluanov: There is no money. The budget is formed. Maybe, taxes will be increased.

Medvedev: If incoming conditions do not change, then the difficulties will increase.

CONCLUSION

The government got the idea that everything is bad and that something must be done.

There are reasonable proposals to support the real sector, which were announced by Arkady Dvorkovich and Denis Manturov.

However, positions of Gaydar followers in the Central Bank and the Finance Ministry remain unshakable.

It is not a problem for them to give banks (only selected ones, others got their licenses revoked) a trillion, but there is no money for agriculture and industry. It is suitable for the market to limit the prices for grain and agricultural machinery, but it is unsuitable for the market to limit the margin of the banks (selected).

Therefore, support of industry and agriculture will be very limited.

Serious measures are, for example, to give banks not a trillion, but half a trillion and to give agriculture and industry half a trillion, or to cut taxes for half a trillion – such options are not considered.

They are not ready to abandon monetarism-utopianism, to change the economic model, to take care not of banks and ratings, but of non-raw production yet.

So after these two meetings my economic forecast is the following: the crisis will intensify.

Rostselmash will probably reduce the production plan.

Source: babkin-k.livejournal.com