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Professor Zubets: A 30-40% house price reduction can cool the economy – Rossiyskaya Gazeta

Date: July 13, 2024 Time: 19:27:29

Alexey Nikolaevich, is economic overheating good or bad?

Alexey Zubets: Overheating is a state of the economy in which the demand for goods and services far exceeds the supply. If demand is greater than the ability to produce various goods, then prices for them will rise and inflation will rise, which, in turn, will lead to price imbalances throughout the economy. Money will begin to depreciate and contractors who have entered into long-term contracts will not be able to meet their obligations. The budget will have to find funds for additional financing of projects, to increase pensions, salaries of public sector employees and further down the chain. That is, overheating is a dangerous economic phenomenon that can have far-reaching consequences, including a serious economic crisis.

Is the Russian economy really overheated?

Alexey Zubets: There are signs of overheating, but I wouldn’t exaggerate them or turn them into a tragedy. Rosstat estimates that the level of capacity utilization in the manufacturing industry is 60%. Furthermore, the load even has a slight downward trend: at the end of last year it consistently exceeded 61%. And the lack of demand, according to businessmen, is the second most important obstacle to the development of companies after the uncertainty of the economic situation.

What currently limits the expansion of production of products that could meet growing demand?

Alexey Zubets: First of all, it must be said that 34% of companies are not held back by anything, at least that’s what they said in a survey conducted by Rosstat. If we talk about obstacles, first of all, as I already said, there is the uncertainty of the economic situation, noted by 40% of those surveyed; This is followed by insufficient demand in the domestic market (37%), in third place is the lack of qualified workers (29%). These are the three main obstacles that slow down the development of the Russian manufacturing industry. Next in importance are high taxes (25%), expensive loans (22%), lack of funds (21%), insufficient export opportunities (20%), worn out or missing equipment (13%), lack of raw materials ( eleven%). Import competition ranks last, as noted by 10% of study participants.

Are there still staff shortages?

Alexey Zubets: The lack of qualified workers is the most important factor slowing down production. And we see this in the dynamics of real wages. Last year it grew almost 8%; This year, according to forecasts from the Financial University, it will increase by at least 5% in real terms, that is, less inflation. According to the latest data from our research, salary expectations, that is, the level of remuneration to which job seekers are guided, exceeded 140 thousand rubles.

But rising wages will increase companies’ labor costs and, therefore, inflation. And that could slow production. So, in terms of labor resources, there is indeed an overheating of the market. But this must be addressed, first of all, by accelerated training of personnel for production.

Will the Central Bank be able to “cool down” the economy?

Alexey Zubets: The Central Bank’s high interest rates essentially slow down production, if at all, only slightly. Rather, it slows the rapid growth of consumer loans.

If we talk about the obstacles that hinder the development of the economy, I would put in the foreground not the growth of wages, nor taxes, nor the lack of demand, but insufficient support for the expansion of production. It is clear that there is huge pent-up demand in the country: the net amount of financial assets in the hands of the population exceeds 100 trillion rubles, of which about half are bank deposits. That is, there is enormous unspent demand in the country, supported by the high rate of the Central Bank. People, instead of spending money, keep it in banks. However, this situation cannot continue indefinitely. Sooner or later, this money will pour into the market, and to avoid a financial flood, it is necessary to offer people a large amount of goods for which they will exchange their money. It could be, for example, cheaper housing. At current prices, demand for apartments has dried up, but if they are reduced by 30-40%, and there are opportunities for this, most of that overheating of the consumer market will go to the real estate market. In addition to this, it is necessary to create greenhouse conditions for all those willing to produce industrial and consumer goods: support investments, introduce special tax regimes and protect against extortion and corruption. However, it is in this direction that the tax reform, which is currently being debated in the Duma and in the government, should move forward. I hope that it will be possible to create a favorable preferential regime that will ensure the development of production and an increase in the volume of goods sold.

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Hansen Taylor
Hansen Taylor
Hansen Taylor is a full-time editor for ePrimefeed covering sports and movie news.
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