The announcement that Russia’s Cabinet plans to raise the retirement age is a step in the right direction. While there are question marks about whether it will be implemented in full, it could stop the working-age population from falling and boost potential GDP growth by about 0.3-0.5%-pts p.a. over the next 15 years. However, we don’t think it marks the start of a reformist shift in policymaking. Meanwhile, the accompanying news that the VAT rate will be hiked next year doesn’t necessarily mean the overall fiscal stance will be tighter, but the resulting rise in inflation may limit scope for monetary easing.
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