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On December 17, the Gasprom and Naftogas signed relevant supplements to the gas contract: the price of gas for Ukraine is reduced to $268.5 per 1,000 cubic meters fr om the current one of $406. Also, an agreement was reached on a purchase by Russia of $15bn worth of the Ukrainian Eurobonds. According to Ukrainian Premier Nikolai Azarov, without the above arrangements with Russia Ukraine faced both a bankruptcy and social collapse.

A detailed analysis of indices of business surveys of the Gaidar Institute showed that in November Russian industry made probably an effort to break away from stagnation.

The World Bank has revised downward its growth projection for Russia’s national economy in 2013 and 2014.

On 13 December, the Bank of Russia revoked the banking licenses of three mid-sized banks: Investbank, the Bank of Project Financing, or BPF, and Smolensk Bank. The reasons that Russia's financial regulator gave for the closure of each of the three banks are pretty similar: inadequate liquidity, failure to meet legal obligations to creditors and depositors, and low asset quality resulting from risky credit policies.

On 10 December, the Bank of Russia reduced the accumulated amount of its FX interventions related to an automatic shift of the upper and lower boundaries operational band by 5 kopecks, from $ 400m to $ 350m. This decision marked yet another step towards a more flexible exchange rate, made by the regulator in the framework of the planned shift, in 2015, to a floating exchange rate.

The texts of two federal laws recently signed by the RF President, Federal Law No 349-FZ ‘On the Federal Budget for 2014 and the Planning Period 2015 and 2016’, and Federal Law No 348-FZ ‘On the Introduction of Amendments to the Federal Law ‘On the Federal Budget for 2013 and the Planning Period 2014 and 2015’ were posted to the RF Ministry of Finance’s website (on 4 and 9 December respectively). Besides, the textual part of the first Law (without the appendiced tables) was published on 6 December in Rossiiskaia gazeta [The Russian Gazette].

The Accounts Chamber of the Russian Federation and the expert community suggested, as a method of preventing tax avoidance via offshore channels, that the RF Government should introduce an additional tax, to be levied on transactions with offshore companies.

At the Ninth WTO Ministerial Conference, held in Bali, Indonesia, fr om 3rd through 7th December 2013, ministers of trade from 159 participant countries officially adopted the first multilateral trade agreement of the last two decades.

The Bank of Russia released a new draft regulation 'On Determining the List of Systemically Important Credit Institutions'. In accordance with that document, the Bank of Russia's Banking Supervision Department will determine, on an annual basis, the list of systemically important credit institutions, to be approved by the Bank of Russia Banking Supervision Committee. 

On 3 December, the RF Ministry of Economic Development released information that its previously published GDP growth target for 2013 was lowered to 101.4% from 101.8%. The Ministry’s GDP growth rate for 2013 is downgraded as follows: industrial production - to 0.1% from 0.7%; investment in fixed assets - to 0.2% from 2.5%; retail turnover – to 3.8% from 4.3%.

It should be reminded that, according to Rosstat’s preliminary estimates, growth of the GDP physical volume index in Q3 amounted to 101.2% of its previous period’s level, and over the period of January-September 2013 – to 101.3% of its level over the corresponding period of 2012. Thus, the RF Ministry of Economic Development predicts that the growth rate is going to slightly accelerate over the last few months of 2013.  

Nevertheless, another fact to remember is that a number of key economic indicators have been on a downward trend for eighth quarter in a row. Over January-Octoberе 2013, the volume of investment in fixed assets amounted to 98.1%, and the volume of output in the construction sector – to 98.6% their corresponding 2012 indices. The financial results displayed by enterprises and organizations have been on the decline throughout the year 2013. Thus, the balance of profits and losses for the period of January-September 2013 amounted to 83.3%, including in the processing industry – to 68.3% of the corresponding indices for January-September 2012, a factor that sharply reduced the potential for enterprises and organizations to fund their investment programs without attracting loans. Investment in fixed assets relies in the main on government funding; the inflow of foreign investment remains at a low level.

That Russia’s domestic economy has a low investment attractiveness is evident by the fact that the share of foreign direct investment in the capital inflow structure remains at the level of 14.1%, while in the pre-crisis year 2008 it was 26.0%. Capital outflow is on the rise: over the period of January–September 2013, its volume rose to $ 48.1bn, or by $ 1.7bn above its corresponding last year’s index. Russian companies prefer to invest abroad, as seen by the fact that the volume of investment in Russia’s economy over January-September 2013 amounted to $ 132.4bn, while Russian investment abroad – to $ 162.3bn.

The rate of economic growth over the period of January-October 2013 was negatively influenced by declining net exports – according to the RF Ministry of Economic Development’s preliminary estimates, this index dropped by 8.8% on the corresponding period of last year. The growth rate of the per annum value of Russian exports has been dwindling for five quarters in a row. The growth rate of imports began to decline in Q1 2013, its downward movement being as follows: 6.5% – in Q1; 3.7% – in Q2; 0.4% in Q3 on the corresponding periods of 2012. In spite of the noted slowdown, the overall share of imports in the national economy, due to the stagnating output indices displayed by the core types of economic activity, did not diminish. The value structure of GDP displayed a change towards increased final consumption expenditure alongside shrinkage of the shares of gross savings and net exports.

The growth rate in the processing industry has been falling for six months in a row, since May 2013. This occurs due to the downward movement of effective demand, the low competitive capacity of domestic products by comparison with imports, and low productivity in industry. The national economy demonstrates declining production in the machine-building complex and the related sectors of engineering materials. Over January-October 2013, the output machinery and equipment shrank by 6.6%, that of electrical equipment – by 4.0%, that of transport vehicles – by 1.3%, and that in metallurgical industry – by 2.0% on the corresponding period of last year.

It is unlikely that, in the current situation, the growth rates in the core sectors of the national economy may accelerate in the year’s last quarter. So, it can be assumed that the year-end GDP growth index will not go above its level recorded in January-September 2013.

O.I. Izriadnova – Head of the Structural Policy Department

The Russian Federation has completed a second round of monitoring the performance level of higher educational establishments; its results have revealed that the licensing and accreditation procedures are applied inadequately, if at all.

The ten-weeks-long Geneva talks among World Trade Organization members have failed to produce a comprehensive ‘trade facilitation’ agreement initially expected to be signed at the Ninth WTO Ministerial Conference in Bali, Indonesia, early in December 2013. The proposed accord, once achieved, could have helped to breathe life into the moribund Doha round of world trade talks. So, yet another attempt to introduce the first-ever worldwide trade reform has failed.

On 27 November, Rosstat released official data on remuneration of the staff of federal bodies of state authority over the first 9 months of 2013.

At present, according to available information, a list of assignments is being prepared for the Presidential Executive Office and the RF Government, based on the results of the RF President’s meeting, on 8 November, with the delegates of the All-Russian Congress of Municipal Formations. Among other issues, they discussed the possibility of introducing changes in the powers of local authorities to dispose of their budget revenue and expenditure.

25 ноября 2013 г. во Всемирной торговой организации прошло заседание Совета по разрешению споров, на котором по запросу Евросоюза была сформировала панель арбитров по разрешению спора по режиму уплаты утилизационного сбора на автотранспортные средства, взимаемого в Российской Федерации.

As of 25 November, the annual growth rate of inflation amounted to 6.4%. According to the RF CB, inflation is expected to remain at about the current level until the end of the year.