The discussion focused on the current economic situation in the context of the coronavirus pandemic and measures to support the real sector of the economy and the population.
21 March, Saturday 2020
Excerpts from the transcript:
Meeting on economic issues
Mikhail Mishustin: Good afternoon, colleagues,
I have asked you to meet here today to discuss the current situation. At present our economy is experiencing the impact of two negative factors – the coronavirus infection and a significant volatility of the stock markets as well as the global oil and gas markets. We are taking proactive preventive measures to reduce the impact on Russia’s financial system, on the real sector of the economy and the people.
We have adopted the Plan of Priority Measures to Ensure Sustainable Economic Development. The commission headed by Mr Belousov is working on this issue. We are acting jointly with the Bank of Russia. At the beginning of the week we took measures against the economic impact of the coronavirus and the volatility in the global financial and raw materials markets, whereas yesterday the Bank of Russia announced a set of measures to support citizens and the economy which complements and enhances the actions taken by the Government. I would like to thank our colleagues and you, Ms Nabiullina (addressing Elvira Nabiullina) for these prompt and professional actions.
We are working on two interconnected tasks together with the Bank of Russia. First, to prevent a decline in bank lending to the real sector of the economy, and second, to support small and medium-sized businesses. These include tour agencies, small hotels, hair salons, repair shops and other small service companies that found themselves in a quandary due to falling demand and restrictions because of the coronavirus outbreak. Meanwhile, these businesses provide jobs and – which is key – incomes for millions of Russians.
The Bank of Russia is launching a big supplementary programme of soft lending for such small companies so as to help them avoid financial problems. What is crucial, as has already been mentioned, is that a new tool is introduced with funding worth half a trillion roubles which will offer loans to small and medium-sized enterprises.
In turn, the Government will ensure rent deferrals for small enterprises.
In addition, a whole set of measures are being taken to support the accessibility of mortgage loans. Bank regulations are softened regarding loans to companies in the affected industries as well as those enterprises which are presently in need of support in order to expand production, primarily of medical items and medicines.
Both the Government and the Bank of Russia are analysing the situation on a daily basis. If needed, we will take more steps individually and will provide prompt information about them.
I will name a few major points which cause concern for the people and which we should give a special focus to.
The first is the labour market, possible layoffs and even unemployment. At present, various flexible employment opportunities should be considered – reduced workdays in some places and working remotely in others, which fits with medical recommendations best. We will separately monitor how the transition to working remotely is proceeding. Layoffs must be the last resort even under the current fairly complicated situation.
If someone is tempted to take advantage of the commotion around the coronavirus to resolve their current issues by dismissing personnel, such enterprises will be checked by the Labour Inspection, the Federal Taxation Service and the Prosecutor’s Office. The same will be done if there are complaints about wage arrears.
A special service has been launched at Onlineinsspection.rf (Онлайнинспекция.рф), where both employees and employers can find information they need and get consultations. The portal will help choose the best approach to maintaining employment levels and many other matters.
Clearly, due to the fall in the number of clients, many companies are likely to face financial problems, cash shortages and other issues that are connected with the workers’ inability to perform their duties. But employees must not suffer in this case. You know that we have established a moratorium on inspections of small and medium-sized businesses except those whose activities may endanger people’s health or lives. I would like to warn everyone again – if there are wage arrears or unjustified layoffs, the moratorium will be void for such businesses with all that it implies. I ask the Federal Service for Labour and Employment to monitor this closely.
To prevent such things from happening, we are introducing weekly monitoring of the labour market situation in the regions, particularly in one-industry towns, which face higher risks in this respect. If necessary, we will allocate extra subsidies to the regions for unemployment benefits.
We will also monitor on a weekly basis the situation with wages. Also, we will tighten control so that all laid off employees get all the benefits they are entitled to by law.
However, we realise that all this, as well as increasing sick leave payments due to the quarantine, is an extra financial burden on business. To reduce it, we launched a special mechanism of such quarantine sick leave payments – from Day One the money from the Social Insurance Fund goes directly to the people. If the employment situation changes, the Government will present a package of measures to support people and businesses. Among other things, we will organise advanced training courses and pay scholarships to the people who enrol in them.
We will also reimburse part of the losses incurred by employers taking on people who had been laid off. We will support the unemployed if they decide to open their own business. Also, in view of the currency market situation, we are stepping up the monitoring of the condition of the systemic enterprises. We have made up a list of such enterprises. Within two weeks, respective ministries and agencies together with banks must launch stress tests of the enterprises within the risk zone. Following the tests results we will prepare support measures, if needed.
Colleagues, this is a huge job, the deadlines are tight, and we must work as actively as possible so as to adopt the necessary decisions without delays.
The situation with fuel supplies for the people and businesses should be looked into as well. A shock-absorbing mechanism has been in effect in Russia since 2019 aimed at stabilising petrol and diesel fuel prices in the domestic market. Applying the mechanism made it possible to compensate the oil companies for their shortfall in export revenue when they sold fuel domestically below global prices. It should now also compensate for the decrease in federal budget revenue due to the fall in world oil prices.
Last year, the federal budget paid over half a trillion roubles to compensate for the difference between the export prices of oil products and their prices in the domestic market. The situation has reversed, and this mechanism designed by the Finance Ministry makes it possible for us to stabilise the budget. I would like to commend the work of the Finance Ministry, which launched this mechanism last year and implemented it actively.
Another important topic is world oil prices. Today, the global economy is going through a very volatile period, which has a direct impact on the oil market. The oil price has lost 60 percent since the beginning of the year, while 55 percent of it was lost during the past month due to the effect of the coronavirus on the global economy and the risk of increased offer. On some days, oil price fluctuations exceeded 10 percent, which in itself clearly indicates the uncertainty among market players regarding their next moves.
I would like to single out several factors that affect the market most of all today. It is the coronavirus effect and the quarantine in several countries. In addition, the expectations of the infection spread and response measures by different countries have lead to a sharp slowdown of economic development.
As a result, we witness a considerable drop in oil demand, primarily in the transport sector, which accounts for 60 percent of global demand. We see the contraction both in America and in Europe. However, it is important to note the start of a confident recovery of demand in China.
Another crucial factor is a high probability of increased offer in the short term.
Today’s market reaction shows that the negative effect of the coronavirus on the economy is a major cause of falling oil prices. It means that the global economy will start to gradually recover only after the epidemiological situation in the world gets back to normal, the way it is happening in China.
The Russian oil industry is prepared for such volatility, as it is one of the most competitive oil industries in the world. Oil production continues, and the companies are working to full capacity. At present, Russia continues to place its products in the key markets.
As to petroleum prices, the Government and the Energy Ministry are daily monitoring the supply of oil products to the market in the proper amounts, and ensuring control of the prices.
Source: Government House, Moscow