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Experts: financing Crimea’s economy no problem for Russian business

March 19, 2014, 2:14 UTC+3 MOSCOW
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MOSCOW, March 19, /ITAR-TASS/. Financing Crimea’s economy will not be a big problem for Russian business, analysts said answering Itar-Tass.

“Crimea has a weak economy. It is a subsidized region and it cannot be self-sufficient,” holds Aleksandr Morozov, chief economist in HSBC bank for Russia and the CIS. At the same time, as noted by Oleg Kuzmin, chief economist of Renaissance Capital bank for Russia and the CIS, “Kiev spent on Crimea’s economy some 1.2 billion dollars (44 billion roubles) in 2013. This is only 0.2 percent of the expenditures from the consolidated budget of Russia last year.

The bulk of spending in the near perspective will go to even out the living standards in Crimea with those in Russia, Morozov holds. According to assessments of Renaissance Capital bank, wages and salaries in Crimea are one-third of those in Russia and pensions are 25 percent. Moreover, there may be the need to invest in Crimea’s infrastructure, Morozov believes. “A bridge between Taman and Kerch would be a logical solution from the geopolitical point of view, The need for other projects should be analyzed,” the expert said.

Kuzmin believes modernization of the ferry lines is the infrastructure is a project to be implemented sooner. Vladimir Bragin, director for financial markets analysis at Alpha Capital managing company, notes that state and private investment may go into the recreation area and into agriculture, including wine growing and wine making.

The expenditures from the Russian budget would be eased due to several factors. First, Crimea bears considerable part of expenditures. Second, Russia will not have to pay about 100 million roubles a year for renting the naval base in Sevastopol. Third, the weakening of the rouble will increase the taxation base of large Russian companies and will lead to the increase of tax receipts to the budget. “In view of a large volume of expenditures from Russia’s consolidated budget (about 25 trillion roubles in 2013), it would not be very difficult for Russia to allocate funds for development of Crimean economy,” Kuzmin noted.

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