There is some lull in the market.
EURUSD is consolidating below the resistance zone of 1.1200.
We keep purchases from 1.1035.
Now, let's talk about Russia.
Is economic growth possible in Russia?
The last time, non-zero growth occurred in 2011-2012 after the recession in 2008-2009. Then the growth became almost zero from a growth below 2% per year with inflation of at least 4%. There must be some kind of mistake?
With the backwardness of Russia from developed countries, it needs growth of at least 5% per year to reduce the backlog. But this does not happen. One of the reasons is the huge outflow of capital at the level of 5% of GDP per year. This is the representation of a lack of growth.
Everyone is talking about monstrously bad institutions and there is no protection of property rights, there are no normal independent courts. Plus higher taxes than, for example, in the USA. They will tell me, what about the 13% income tax? Yes, this is super - for super-wealthy businessmen. But for workers, of whom 90% of the population, this is not at all super, because the employee pays not only 13% of the tax, but he also actually pays a single social tax and in total, this is about 40% which is quite a lot. If we add VAT and excise taxes which an average Russian pays when making purchases, when spending the same salary, then the total tax can reach 70% of the employee's income.
But that's not all.
The entire Russian economy is crushed by monopolies. As we understand it, the largest and largest business lives best, having a share of natural rent and/or a monopoly such as the oil and gas industry. Monopolies like Russian Railways, Rosatom, Sberbank, and VTB. Aeroflot, energy companies, metallurgy. At the regional level, there are road builders and housing builders (usually closely associated with the administration), utilities, water utilities. All these businesses are either monopolies or have received part of the rent.
The rest of the business is not developing tax-crushed.
But it still doesn't end there, the state pursues a super-tight monetary policy both in 2019 and, probably, in 2020. The state takes more money out of the economy than it returns, taking the excess into reserves. It is not possible to replace these funds with loans that are too expensive. As a result, at least 25 million people have past due debt on loans in Russia.
The state will not change radically, it will not improve institutions and significantly reduce taxes. This is obvious.
But the state can weaken the financial stranglehold, it can lower the Central Bank rate to an acceptable 4-4.5% per annum and significantly increase the flow of money into the economy. An example is through a significant increase in pensions and salaries of state employees.
Yes, it will increase inflation but it will give a breath of air to the population and to small and medium-sized businesses. And this is probably the only real way to some noticeable GDP growth in today's Russia.
