The Russian economy is predicted drawdown due to the growth of VAT

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Photo: Maxim Shemetov / Reuters

The increase of VAT from 18% to 20% may reduce GDP growth by 0.6 percent, said “the Tape.ru” the head of the Center for macroeconomic analysis of Alfa-Bank Natalia Orlova.

“In the absence of offsetting measures is a direct consequence of the VAT rate increase will be deductible at the level of 0.6 percent of GDP from economic growth and acceleration of inflation by 1 percentage point. For this reason, the government recently downgraded its growth forecast for 2019 from 2.1% to 1.4% (our forecast is 1 per cent),” said Orlov.

According to her, by the middle of 2019, the annual inflation rate should reach 4.5 to 5 percent. “It should be understood that the VAT increase is a one-time shock. After it is incorporated into the price level and in the business projects of the companies, its effects will be exhausted. In other words, the negative effects from the increase in VAT is the issue of the early — mid 2019”, — concluded the economist.

On 24 July the state Duma adopted in the first reading the bill on increasing the VAT from 18% to 20% from 1 January 2019. The document also consolidates at the current level of 30 per cent of the insurance contributions of employers.

The future increase of the VAT Prime Minister Dmitry Medvedev announced on June 14. It is assumed that the additional budget revenues will be spent on health, education and infrastructure projects.

Video, photo All from Russia.

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