In February 2008 as compared with the previous month prices for aluminum, copper and nickel increased, correspondingly, by 13.6, 11.7 and 1%, and as compared with February of the previous year - prices for nickel decreased, for aluminum - remained at nearly the same level and prices for copper went up considerably - by 39%. Growth of prices for copper was connected with the reduction of this metal stocks at London Metal Exchange storehouses.
TABLE Average Monthly World Prices in February of the respective year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Oil (Brent), 21.4 15.0 10.8 26.9 27.2 20.3 32.1 30.9 44.8 59.7 58.26 92.USD/bbl Natural gas, USD /1 2.204 1.994 2.036 2.828 5.642 2.260 6.367 5.407 6.242 6.128 7.606 8.mln BTU Petroleum, USD 0.652 0.508 0.524 0.934 0.882 0.616 1.045 1.045 1.37 1.734 1.662 2./gallon Copper, USD/ton 2392.0 1673.3 1414.8 1779.1 1811.4 1601.5 1705.9 2759.0 3254 4982 5671.1 7887.Aluminum, 1567.7 1479 1188.1 1584.2 1602.1 1370.8 1428.04 1685.6 1883 2455 2759.14 2776.USD/ton Nickel, USD/ton 7670.8 5462.2 4629.4 10269.6 6544.6 6042.7 8619.64 15178.3 15350 14979 41154.5 27955.Source: calculated on the basis of London Metal Exchange, International Petroleum Exchange (London) data According to the data of the Federal Customs Service, earnings of the Russian oil exporters increased by 63% up to USD 23.133 bln (USD 14.181 bln over the corresponding period of the previous year). At the same time physical volume of oil export supplies over that period reduced by 4.5% from 38.352 mln of tons down to 36.619 mln of tons. In January-February 2008 the proportion of oil export in the total volume of Russian export was equal to 36.1%, in fossil fuels export - to 51.0% (33.1% and 50.4%, correspondingly, in January-February 2007).
Earnings of Russian oil products exporters in January-February 2008 increased by 65.9% up to USD 10.233 bln (USD 6.167 bln a year ago). The volume of oil products export supplies was equal to 16.733 mln of tons, which is by 6.1% more than the results of January-February of the previous year - 15.776 mln of tons.
Over two months of the current year the share of natural gas in the structure of foreign trade turnover decreased from 18.6% to 18.2%, however its value volumes increased by one and a half times not only due to the growth of prices but also because of physical volumes increase. The share of nickel and goods made out of it decreased from 2.5% to 1.7%, the share of ferrous metals - from 7.3% to 5.5%, export volume of these goods growing.
The Government of the Russian Federation second year in a row carries out step-by-step increase of export duties for unprocessed wood. It should be remembered that in June 2006 the duties went up from Euro 2.5 to 4 per 1 cu. m. Last February the decree on gradual increase of export duties for unprocessed wood was signed. For instance, according to new regulations, starting from 1 July 2007 export duties for round wood increased by 20% of the deliver price and were equal to at least Euro 10 per 1 cu.m. Further it was envisaged that starting from 1 April 2008 customs duty rate would increase up to 25% (Euro 15 minimum), and from Aril 2009 - up to 80% of the price (at least Euro 50 for 1 cu. m).
The measures undertaken, however, did not influence the structure of wood export at once. Physical volumes of roundwood supplies in 2007 increased by 2.3%, of saw-timber - by 14.2%, of particle and fibreboards - by 52.0% and 4.2%, correspondingly. Veneer export over the same period reduced by 2.7%. In the structure of currency earnings from wood export roundwood continued to prevail, its proportion in the cost of wood and wooden goods supplies to external market was equal to 47%. The share of saw-timber was equal to 37%, volume of wooden boards supplies (veneer, particle and fire boards) did not exceed 12% of the total export. As compared with 2006 the share of roundwood reduced a bit as a consequence of currency earnings from saw-timber export.
According to the data of the Federal Customs Service of the Russian Federation, over January-February 2008 round wood export reduced by 3.9% down to 6.4 mln of cu. m. Taking into account that starting from April duty rates increased by 50% more, up to Euro 15 per 1 cu.m, a more considerable reduction of unprocessed wood export can be expected as a result of the year.
Export of other products of mechanical wood processing also reduced. Thus, the volume of saw-timber as a result of 2 months reduced by 2% down to 1.4 mln of cu. m, of veneer - by 3.7%, down to 220 thousand of cu. m. at the same time pulp export increased by 24.2% up to 317.8 thousand of tons and newsprint - by 36.5% up to 196.4 thousand of tons.
At the same time issue of export duty for unprocessed wood was one of the crucial barriers for RussiaТs accession to the World Trade Organization. Increase of duties for timber, in the opinion of the European Union, infringes on the interests of the Scandinavian, especially Finnish, producers of pulp and paper that buy a considerable part of their raw materials in Russia. Leading companies of wood processing industry, which provides about 16% of the GDP of Finland, declared several times that as a result of increase of export duties rates for round wood, the branch of the industry will end up in the crisis. In Russia it is believed that increase of export duty rates can stimulate investors to finance expensive projects to construction of pulp and paper plants.
Growth of import from non-CIS countries was observed for all consolidated positions of goods nomenclature. Thus, import of machine-building production increased by 44.7% and was equal to USD 8 896.3 mln, of chemical production - by 52.7% (USD 2 439.8 mln), of foodstuffs and raw materials for their production - by 24.8% (USD 2 129.4 mln), of textile goods and footwear - by 37.3% (USD 825.6 mln).
On 24 April 2008 the regular meeting of interdepartmental commission on protective measures in foreign trade and customs and tariffs policy took place. The Commission made the following decisions:
- to prolong the action of temporary import duty rates for clothes from natural fur (import duties currently in action - 10%, but no less than Euro 30 per 1 kilo of clothes for the adults and no less than Euto 15 for kilo of children assortment) for 9 more months;
- to prolong rates currently in action that are equal to 0% for plain aluminum without time-limit;
- to prolong temporarily (for 9 months) reduced import duty rate (10%) for aluminum band for cans production;
- to prolong duty-free regime of import of some kinds of constituents for mobile phones;
- to prolong duty-free import for digital cameras;
- to establish temporarily - for 9 months - zero duty rate for polyester fibers of high durability;
- to cancel for 9 months import duty rates for polyethylene of low density;
- to establish the limitation for temporarily duty rate of 1 month for combine and ensilage harvesters.
Abolition of duty for aluminum made the market more competitive. Nullification of duty rate for digital cameras increase the volume of this market roughly by 400 times. In 2006 there were only 21 cameras out of 100 that were legally imported, now there are 95 such. VAT collection from digital cameras sales, according to the Association of trading companies and producers of electric household appliances and computers, tripled over the year up to RUR 4.5 bln and their price in retail trade decreased by 15%.
Reduced down to 7.5-10% duties for the clothes made from the natural fur are also introduced on the permanent basis. Due to legalization, import volume increased by 20%.
In April 2008 in Geneva next round of bilateral and multilateral consultations on Russian FederationТs accession to the WTO also took place. During negotiations with the representatives of the USA and Cairns group one of the most burning issues concerning possible limits for governmental support of Russian agriculture was discussed. The volume of governmental support of the agriculture sector declared by Russia is USD 9 bln a year.
Representatives of the USA had understanding for arguments of the Russian side. But representatives of the Cairns group still base their consideration on the level of governmental support in 2004-2006, when government support of the agriculture was at the level of USD 3.2-3.7 bln.
As a result of consultations with the partners Russia will prepare the final version of the report of the working group, where conditions and RussiaТs responsibilities on accession to the WTO will be stated. At the same time Russia is preparing amendments to the law on technical regulation in order to eliminate the barriers in trade and changes to the customs legislation concerning import regime of goods, having ciphering tools, as well as in the sphere of intellectual property protection.
In April 2008 the protocol on conclusion of negotiations with United Arabic Emirates on RussiaТs accession to the WTO, which started in December 2007.
Relations of Russia and the UAE are developing and expanding. Thus, in 2007 the volume of bilateral trade increased by 27%, and goods turnover was equal to USD 821 bln. It is supposed that in the forthcoming future it will exceed the volume of USD 1 bln.
Soon it is planned to conduct next stage of bilateral negotiations with Saudi Arabia and Georgia on WTO, in course of which it will be necessary to settle down some arguable issues.
Budgetary and Tax Policy О. Kirillov As of the first quarter of 2008 results, one can confidently say that the mitigated budget policy, implemented since the end of preceding year is sustained in the current year as well. Due to the rapid growth of budget expenditures and budget dependence on the resource sector of the economy, there are certain risks to the stability of public finances. The Ministry of Finance is preparing a series of innovations in the three-year budget for 2010-2012, as well as in the long-term financial plan for 15 years.
As of the first quarter of the 2008 RF federal budget execution, the trend to extension of budget revenues and expenditures is sustained and in the current year the relevant indicators have significantly exceeded the level of the same period of preceding year. The dynamics of the basic parameters of the RF federal budget in 2006 - 2008 is presented in Table.1.It should be noted, that in monetary terms, the income and expenditure indicators of the RF budget for the January-March 2008 exceed the 2007 indicators by 26 per cent in terms of revenues and 32 per cent in terms of expenditures.
Table Basic parameters of the RF Federal Budget in 2006 - 2008 (% versus GDP) 2006 March 2007 2007 March Revenues 23,5 20,94 23,87 23,Expenditures 16,2 13,98 18,39 16,Deficit (Ц)/ Surplus (+) 7,4 6,95 5,48 6,Source: RF Ministry of Finance, IET estimates Monthly revenue to the federal budget in per cent versus GDP for the first quarter of 2008 (see Fig. 1) are irregular and their dynamics is negative, though the federal budget revenue exceeds the level of 2007. The low income indicator in March 2008 is caused by a reduced volume of taxes, administrated the Federal Tax Service in terms of GDP.
40% 35% 30% 25% 20% 15% 10% 5% 0% янв. февр. март апр. май июнь июль авг. сент. окт. ноябрь дек.
2005 2006 2007 Fig. 1. RF budget monthly revenues in 2005 - 2008 (per cent versus GDP).
% ВВП Table RF budget monthly revenues in 2006 - (% versus GDP) 2006 March 2007 2007 March 2008 RF budget execution on cash basis, in 2008 % Taxes and other payments administered 11,27 9,93 11,50 9,52 21,by the Federal Tax Service Taxes and other payments administered 10,76 10,00 9,98 12,14 25,by the Federal Customs Service Receipts administered by the Federal Agency for Management of Federal 0,26 0,14 0,25 0,18 22,Property Revenues of the federal budget 1,25 0,87 2,14 1,53 49,administered by other federal structures Total revenues 23,54 20,94% 23,87 23,37 24, Source: RF Ministry of Finance, IET estimates In the first quarter of 2008 those revenues have been reduced versus the relevant indicators of 2007 by 0.41 per cent of GDP. The volume of federal budget revenues, administered by other federal agencies exceeds the preceding year indicators in GDP share. The amount of taxes, administered by the Federal Customs Service, has grown by 2.14 per cent of GDP; the volume of federal budget revenues, administered by other federal agencies, has increased by 0.66 per cent of GDP. Revenues, administered by the Federal Agency for Federal Property Management, has grown by 2.14 per cent of GDP.. Is should be noted, that in January and February 2008, revenues, administered by all tax agencies, have exceeded the relevant indicators of preceding year. The structure of the basic federal budget revenues as broken down by federal tax administrators is presented in Table 2.
With regard to the annual plan for taxes and levies, the execution of the budget for the first quarter made 24 per cent, which reflects the high uniformity of government revenues. It is worth noting, that nearly per cent of the total amount of revenues, planned for the year, administered by other federal agencies, were collected by April of the current year. Nevertheless, the impact over the gross annual budget cash revenue execution is insignificant, as the bulk of revenues is administered by the Tax Service (46.2 per cent) and Customs Service (49.9 per cent). Monthly dynamics of oil and gas revenues and other than oil proceeds deficit of the federal budget is presented in Fig.2. Oil and gas revenue is assessed as tax on extraction of hydrocarbons plus export customs duties on crude oil, natural gas and oil refinery products. Non-oil and gas deficit is the balance between gross budget expenditures and other than oil and gas proceeds (i.e., the balance of gross revenue less oil and gas proceeds). Non-oil revenues deficit is one of the key indicators for external economic risks assessment in terms of public finance security. As one can see from Fig. 2, the share of the federal budget oil and gas revenues in GDP in 2007 was lower as compared with an average level of preceding years.
This is an evidence of some decline in the budget dependence of the Russian economy on the resource sector. However, the share of oil and gas revenues still remains at a high level. Thus, in January 2008 oil and gas proceeds have exceeded the threshold of 10 per cent and accounted to 13 per cent in GDP.
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