Tatarstan intends to increase GRP in 2021 through industrial giants's new projects

Forecast should be realistic and budget — “balanced”

On 11 September, the government of Tatarstan presented a forecast of socio-economic development and the main parameters of the consolidated budget for the coming 2021-2023. The ministry of economy and the ministry of Finance of Tatarstan have been developing it over the past four months in cooperation with large taxpayer companies, having actually prepared a plan to get out of the “coronavirus pit”. The government meeting was attended by President of Tatarstan Rustam Minnikhanov, Chairman of the State Council Farid Mukhametshin, representatives of ministries and departments.

“As you know, the new coronavirus pandemic has made significant adjustments," Aleksey Pesoshin said, opening the meeting. “The forced regime of strict restrictions and self-isolation, the suspension of business activities have affected the pace of development in the country as a whole. Negative values have been recorded in most sectors of the economy. In the manufacturing sector, the drop is 2,5%. Mining has fallen by more than 6 per cent, resulting in a reduction in the revenue side of the budget. The sectors most affected are retail, tourism, hospitality, and services.”

“It is important that the forecast of socio-economic development of the republic is as realistic as possible, and the budget is balanced," Pesoshin admonished Minister of Economy of Tatarstan Midkhat Shagiakhmetov, who was preparing to present the main macroeconomic parameters.

Higher than IMF forecast

Following the general trend, Shagiakhmetov began with describing global trends in the economy. “This year has been one of the most difficult for the global economy in recent decades," he said. “The IMF in its July forecast estimates a decline in the global economy of 4,9% against growth of 2,9% in 2019," he said.

The illustrations indicated that the IMF gives China a more positive outlook. China may end the “coronavirus” year with an increase of 1% against 6,1% in 2019. Russia is predicted to reduce by 3,9% against growth of 1,3% in 2019. “As a result of the spread of coronavirus, the economies of countries faced limited demand and volatility for energy resources. Restrictions on oil production under the OPEC+ agreement have had a negative impact on the Russian economy," the speaker said.

After the restrictions are lifted, the economy begins to recover. “In January-July, Russia's GRP decreased by 3,8%, and Tatarstan's GRP declined by 1,5 per cent," Midkhat Shagiahmetov said operational data. “Against the background of the pandemic, a significant reduction occurred in industry, oil production and energy, which has been affected by a reduction in business activity in the economy. They provide 50% of the republic's production. At the same time, high rates are maintained in oil refining, agriculture and construction, the share of which is 30%. As a result, the industrial production index was 98,2%.”

Construction and agroindustrial complex have not stopped working, and the gradual lifting of restrictions has a beneficial effect on retail trade. A set of measures has been adopted to support businesses. These include deferral of taxes and social contributions, loan restructuring, introduction of a moratorium on inspections, granting preferential loans to strategic enterprises, and preferential microloans at 1% per annum to businesses. However, no specific figures were given for any measure of support.

Forecast for 2021: production growth of 105,2%

After that, the minister of economy proceeded to the presentation of socio-economic development forecast. According to him, when preparing it, the regions are recommended to rely on the following scenario conditions for the development of the Russian economy: the price of oil is in the range from 43,3 to 46,5 dollars per barrel during 2021-2023, exchange rate — 70,8-71,7 rubles, and inflation — 4%.

As follows from the speaker's speech, the year 2021 should be the point of rapid recovery of production from the “coronavirus pit”. According to the forecast of the ministry of economy of Tatarstan, next year the industrial production index is expected to reach a fantastic 105,2%, or 2,9 trillion rubles. For comparison, this year is expected to decline to 97,3%, and the volume of industrial production is estimated at 2,6 trillion rubles. The ministry of economy of the republic predicts that, starting from the bottom next year, the industry will be able to maintain positive dynamics in the following years. So, in 2022, the industrial production index is expected to reach 102,9%, or 3,13 trillion rubles, and in 2023 — 102,7%, or 3,35 trillion rubles.

The growth drivers in the coming years should be oil refining and petrochemistry projects of TAIF and Tatneft, in the machine-building complex — Kazan Aircraft Production Association and KAMAZ, in energy sector — the projects of TAIF, Tatenergo, and Grid Company.

In 2021, GRP is projected at the level of 103,9%. The sources of growth in economic activity are seen in an increase in the rate of production and trade, which account for half of GRP. Shagiakhmetov reported that the investment projects to be implemented under the new federal law on the protection of investments are being prepared. “We need to quickly synchronise them with the regional regulatory framework," he added.

Ministry of Finance: we will switch to a budget diet

However, the ministry of finance of Tatarstan paints a less rosy picture for the next year. Finance Minister Radik Gayzatullin expectedly reported that this year the budget has suffered significant losses, which, however, have been compensated by federal subsidies. According to his report, the level of income, compared to last year, has decreased by 34,2 billion rubles. A hole in the budget has been formed due to the collapse of income tax fees. They fell short by 32,6 billion rubles. Eighty per cent of the decrease in income tax revenues is due to a reduction in oil production under the OPEC + agreement. In terms of losses, Tatarstan is the fourth among the regions of the Russian Federation after Moscow and the oil regions of Siberia (Yamalo-Nenets District, Tyumen).

The main parameters of the draft consolidated budget for 2021-2023 are as follows: in the first year, revenues will amount to 271,9 billion rubles, a deficit of 2,9 billion rubles, in the following years — 283 billion rubles (a deficit of 3,1 billion rubles) and 294,1 billion rubles (a deficit of 3,2 billion rubles). Further, the minister described in detail what sources will be used to replenish the treasury. As it turned out, the largest revenues next year should bring personal income tax in the amount of 81,5 billion rubles, income tax — 77 billion rubles, excise taxes — 41,2 billion rubles, property tax — 26 billion rubles. Gayzatullin called on the heads of municipalities to be careful about spending next year.

Of particular interest was the speech of the director of the state institution Territorial Compulsory Medical Insurance Fund of the Republic of Tatarstan, Miftakhova. It turned out that with 100% advance payment for the needs of medical institutions, the fund's budget has not been fully implemented, and there are significant balances. Answering questions, Alsu Miftakhova explained that inpatient admissions and high-tech operations were stopped for the duration of the pandemic and promised to make up for lost time. “The main thing is that there should be no false reporting," Rustam Minnikhanov joined the conversation.

The president of Tatarstan drew a line under the discussion: “This year has been very stressful in terms of revenue — with a minus of 33-34 billion rubles, this has not happened for a long time. There were times when we had moments with falling incomes, but they didn't fall so much. The revenue side is very tight, we need to look well for sources to cover the deficit in 2021. The ministry of finance has done a lot of work on the formation of the draft budget — there should be no unauthorised decisions.”

The president warned that the already tense situation could be exacerbated by federal initiatives to seize oil revenues. “There are some movements in terms of increasing the burden on the oil industry," said Rustam Minnikhanov. Therefore, it is necessary to stay within the budget parameters defined by the Ministry of Finance of the Republic of Tatarstan.