Russia Economics - Putin Speaks on Economic Growth, Boosting Construction and SMEs, Green Economy

President Putin spoke at the St Petersburg International Economic Forum today. In his speech, he highlighted the priorities of Russia's economic policy in the coming years.> Economic growth. Putin reiterated that investment will drive Russia's economic recovery. He focused on the tasks at hand for regional governments, which will need to formulate their local investment priorities and work on reducing red tape (for example, with regard to connections to the electricity network and construction permits) by 2024. This will give the business community a better understanding of how regional economies will develop over the longer term and should help stimulate private investment. Regional governments will also soon get access to infrastructure loans at reduced interest rates. By 2024, the scale of this lending support will reach R0.5 trln. > Boosting construction. Starting in September, around 4,000 regulations governing the construction industry that were found to be excessive will be abolished as part of the government's "regulatory guillotine" initiative. The mortgage subsidy program for the primary market will also be prolonged for another year, to July 1, 2022. Around half a million families have already participated, and the construction industry has received a total of R2 trln as a result. However, the mortgage rate will be bumped up to 7.0% from the current 6.5%, and the amount covered will be made R3 mln across all regions. An exception is families with children born after 2017 (even families with a single child), who will be able to get a mortgage at 6% if they buy an apartment in the primary market. For them, the maximum amount for the mortgage will be R12 mln in Moscow and St Petersburg, as well as those two cities' respective regions, and R6 mln elsewhere in the country. > Support of SMEs. A special state-owned company will guarantee loans made to SMEs. A program will also be launched to boost the growth of credits by R600 bln by 2024. Transaction costs for SMEs will be reduced. All banks will participate in the system of fast payments by September, while large banks are expected to hook up to this system already by July. If SMEs are selling goods and services to individuals, their transaction costs will be fully refunded this year. This will primarily be done through budget funds, but banks will also bear some expenditures. > Furthermore, a simplified taxation system will be expanded for SMEs in the food-service industry. Such SMEs in 2022 will not pay VAT if their revenues are below R2 bln. If the SME has fewer than 1,500 (currently 250) employees, it will be able to continue paying a reduced payroll tax at 15% (instead of 30%). > There will also be less anti-monopoly oversight for SMEs. There will be no anti-monopoly oversight at all if the SME's revenues are below R800 mln (the current threshold is R400 mln) or if an M&A deal is below R800 mln (R400 mln now). > The government should increase purchases from SMEs. Government entities should buy at least 25% of goods and services from SMEs. > Green economy. Russia intends to emit less greenhouse gas during the next 30 years than the EU. The government will subsidize the issuance of green bonds. Putin is also encouraging the development of the carbon trading market. Investments in forests, which absorb greenhouse gas, will be very profitable for Russian exporters in the future. All necessary legislation for these projects is expected to be developed by July 2022.