What is a deflator index and how to use it. Deflator index: what it is and how it is used in government procurement Average annual deflator index
Price index and deflator index are special economic indicators that allow you to predict what the real cost of work, goods or services will be in the future.
What is a deflator index
The level of prices for food and essential goods is of interest to almost all residents of Russia. What will the price tags in stores be like in the new year? This question is asked by everyone, from young to old. In order to have at least some idea of the cost of goods, works, and services, officials use a special calculation coefficient.
The deflator index is the basis for determining the dynamics of price indicators in the future. That is, by applying the approved deflator index for 2020-2021 (Ministry of Economic Development) to the current price, it is easy to calculate the cost of a specific category of product or product in the planning period.
Why is this necessary? The calculated indicator is used not only for predicting prices. The deflator index also helps to assess the real level of income of the population. That is, to determine how many products, goods, and services a citizen with a certain income level can purchase.
By analyzing the price level and the solvency of the population, officials determine the directions of social policy. This is necessary to support socially vulnerable categories of citizens. In other words, officials define a set of measures that are aimed at financial support for low-income Russians below the poverty line.
Despite the importance of the calculated coefficients, their use has a significant drawback. When calculating future prices, the inflation rate is significantly underestimated. And this has a negative impact on determining the real level of income of the country's population.
Areas of application
Next, officials determine what prices will be in future periods. Having received the cost positions, the level of income of the population is assessed. Moreover, the analysis is carried out for each category of citizens separately. Calculations are carried out taking into account the needs of the adult working population, minor Russians and, of course, pensioners.
These indicators allow us to forecast the need for indexation of benefits, pension payments and other social supplements. All operations are carried out taking into account the deflator index - annual indexation of benefits at the expense of the Social Insurance Fund (usually carried out in January-February), indexation of pensions, increasing the value of pension points, increasing social compensation, additional payments and allowances.
Note that social policy is not the only area of application of coefficients. For example, the deflator index for 2020 in construction allows you to determine price indicators for building materials, services and work. But this is just the tip of the iceberg. Prices, for example, for finished housing ultimately depend on these calculations.
The deflator index for 2020 for estimates has a similar meaning. This coefficient makes it possible to predict the level of government procurement and determine the need and solvency of Russian organizations in the planning period. For example, a company, when planning the purchase of goods, works, and services, is obliged to take into account not only the completed amounts of financing and its needs, but also the dynamics of prices for the necessary goods, works, and services.
Let us note that none of the spheres of state activity can do without the use of deflator indices. Even the tax system contains calculations based on the application of these coefficients.
Scenarios and calculations
The Ministry of Economic Development is obliged to calculate and approve deflator indices by 2021. Moreover, the values are determined for each reporting period separately, and the forecasting of coefficients is carried out by officials taking into account external and internal factors. Depending on how each factor affects the overall state of the economy, several development options are determined.
In simple words, the Ministry of Economic Development approves forecast deflator indices until 2021 based on scenarios. What is it for? Let's show it with an example.
It is no secret that a number of countries have imposed restrictive sanctions against the Russian Federation. The price level for raw materials (especially oil products) has negative dynamics. The level of customs duties and fees is growing. And officials, when determining deflator indices for 2020-2021, take these factors into account. They develop three scenarios at once:
- Basic, in which all external and internal factors will retain their current values. In simple words, sanctions will remain in place, oil prices will fluctuate around $40-50 per barrel, and customs duties will be frozen at the 2018-2020 level.
- A favorable forecast, in which a positive development trend is expected. For example, sanctions will be eased or completely lifted. Prices for oil products will rise, and customs duties on Russian goods will be reduced.
- Target scenario. This type of prognosis is the most unfavorable. Provides for the most negative impacts of external and internal factors on the Russian economy. For example, sanctions will be tightened, the price of oil will drop to critical levels, customs duties will be increased significantly, the level of inflation and unemployment within the country will increase.
Consequently, the deflator indices of the Ministry of Economic Development are not only a coefficient for calculating price dynamics in the future, but also an important indicator of the development of the Russian economy as a whole, taking into account the influence of external and internal factors.
How to count
The calculation of the indicator is the ratio of nominal values to current ones. Moreover, the resulting indicator is recalculated into percentages. Let's see how the deflator index is used for 2020 (the order of the Ministry of Economic Development determines the formula):
ID = nominal values / current (real) values × 100%.
For example, how is the GDP deflator index calculated:
ID GDP = nominal GDP / real GDP × 100%.
This indicator is general. It characterizes the dynamics of prices for all goods, works, and services for both consumer and industrial purposes. Because GDP is the estimated value of everything produced in an accounting period. But the GDP deflator index indicates the dynamics of prices in the Russian economy as a whole.
Forecast values
In order to apply tax standards, the deflator indices of the Ministry of Economic Development for 2020 were approved in Order No. 684 dated October 21, 2019, and the limits on insurance premiums are indexed annually. The limit for switching to the simplified tax system should be indexed similarly, but officials froze it in order to support business.
For 2020, officials have already fixed the indicators in the forecast of socio-economic development of the Russian Federation for the period until 2024. Using the explanations from the letter of the Ministry of Economic Development of Russia dated October 3, 2018 No. 28438-AT/D03i, we obtain the following deflator index for 2020 (Ministry of Economic Development):
- construction - 105.1;
- oil - 103.6;
- water supply and sanitation - 104.0;
- gas supply, electricity supply - 104.2;
- consumer price index - 103.8;
- agriculture - 103.3.
Note that these indicators are given for the basic scenario of economic development and are relevant while maintaining the current values of internal and external factors.
Among the macroeconomic indicators that help assess the state of production in the country and predict inflation growth, the deflator index for 2018 - 2020 occupies an important place. It is necessary for calculating taxes and helps determine how much money the Russian budget will receive next year.
Who calculates the indicator and how?
Macroeconomic indicators that are used for forecasts are calculated based on statistics from previous years. The deflator index for 2018 - 2020 was calculated by the Ministry of Economic Development together with the Federal Statistics Service. To briefly outline the methodology, real and nominal GDP indicators are compared. The resulting value becomes the basis for calculating tax payments and fees, payments for patents and other budget costs and revenues.
An example of using ID in practice: to calculate the 2018 tax for organizations that pay fees under the UTII system, they use a formula of five multipliers. One of these multipliers is the deflation index. For 2018 it was 1.868, in 2019 it will be 1.915. It turns out that entrepreneurs, having received the same income, working with the same number of personnel, will pay taxes by 2.5% more (this is the difference between the values of two years).
Options for the development of the Russian economy
The deflator index for 2018, 2019, 2020 is calculated by the Ministry of Economic Development based on the prospects for the development of the country’s economy and the political situation. To achieve this, several options or economic scenarios are drawn up. All options are based on the assumption that the “war of sanctions” will continue, the world economy will increase volumes by no less than 3.6% annually, and the cost of oil will increase. Let's consider these scenarios.
Base
Implies that current conditions will continue. There will be no sharp rises or falls, the cost of a barrel of oil will be about 40 US dollars. In this option, it is assumed that exports of raw materials and goods will increase by a third. Domestic retail sales will increase, inflation will remain below 4.4%, and GDP will increase by more than 1.7%. This is a very restrained scenario that will allow the government to implement no more than half of the planned social projects.
Basic Plus
A more optimistic option, which implies an increase in oil prices to $48/barrel, will ensure an increase in the standard of living in the country. In this scenario, it is planned that domestic trade turnover will grow annually, exceeding 3.5%. The turnover of the service sector will increase, exceeding 2.8%. Inflation will be 4.3%. In such conditions, the government will fulfill promises on existing social programs and begin developing new ones.
Target
This is the option we should strive for. According to it, inflation should be below 3.9%, domestic retail turnover more than 5.3%, and in the service sector above 3.9%. If this scenario is implemented, the GDP will be 3%, and the share of exported goods will increase from 9% of the total (the rest is raw materials) to 50%.
Focusing on options for economic growth (bad, normal and very good), the Ministry of Economic Development calculated deflators.
But what really?
While the ministry recommends optimistic ID values (103.4 for the current and next years, 103.2 for 2020), experts from the Higher School of Economics are sounding the alarm. The beginning of this year was marked by a sharp increase in the coefficient: from 103.4 to 109%. It turns out that the values calculated by the Ministry of Economic Development are far from reality.
Of course, with an increase in the global cost of oil, maintaining and increasing the volume of its exports, an optimistic option is possible. But switch to it in a year? Change the deflation coefficient, which changes on average by 0.2 - 0.4%, to 6%? It's kind of hard to believe. In addition, the political situation around the country remains ambiguous.
The beginning of 2019 will show how right the optimists are, when the economic results of 2018 will be summed up and amendments will be made to forecasts and coefficients.
What will happen to prices
Any index is needed for something not only by economists, but also by ordinary people. Thus, the deflator index for 2018 - 2020 helps to navigate: will there be an increase in goods and services for the end consumer or not. Based on the realities of this year, we can say: Russian citizens should expect another price increase. This year it was about 6%, next year it is not yet clear.
Although the Central Bank of Russia claims that inflation is slowing down, the economic situation is improving, and another tax increase is coming. It has already been stated that future advance payments to the budget for those who work for UMDV will increase by another 2.5%. And this is almost all goods, including medicines and fuel. If taxes rise, prices will rise. Representatives of some business sectors have already voiced their position:
- in the automobile market, prices are expected to increase by 10 - 15%;
- tour operators predict an increase in the cost of tours by 15 - 20%;
- builders and real estate experts predict an increase in housing prices by 5 - 7%.
In addition, the new increased VAT rates may not increase the volume of budget revenues, but may reduce them due to part of the business going “into the shadows.” So, despite the optimistic forecasts of the Ministry of Economic Development, the economic situation remains ambiguous.
The Ministry of Economic Development expects a further slowdown in inflation, which is reflected in the forecast of deflator indices for 2017-2019. The restoration of economic growth and stabilization of the domestic currency will ensure a moderate rise in prices, which is in line with the goals of the Central Bank. Experts note the vulnerability of the Russian economy to new external challenges.
The deflator index goes down: forecasts of the Ministry of Economic Development for 2017-2019
The Russian economy has overcome the negative consequences of the crisis, which is reflected in the stabilization of prices. After rising to 13%, the inflation rate slowed to 4%, which corresponds to the target level of the Central Bank. In the future, the authorities expect to consolidate price growth at this level, which will become the basis for macroeconomic stability.
The slowdown in inflation is due to the influence of several factors. The restoration of growth in oil prices led to a significant strengthening of the domestic currency. As a result, prices for imported goods decreased. In addition, the Russian economy is restoring positive growth rates.
A decrease in inflation rates is reflected in deflators, the level of which is determined by representatives of the Ministry of Economic Development. These coefficients are reflected in the comparison of prices in different periods, which makes it possible to predict the further pace of economic development. In addition, deflators are used to index some tariffs, social benefits, etc.
Unlike the Consumer Price Index, deflators use the full range of existing goods and services. Another difference from the CPI is that this indicator reflects underestimated inflation rates.
The forecast values of deflator indices for 2017-2019 are based on scenarios for the development of the Russian economy, developed by experts from the Ministry of Economic Development.
Economic recovery continues
The domestic economy will maintain positive growth rates in the medium term, the Ministry of Economic Development is confident. Despite the continuation of the sanctions regime and the period of low energy prices, GDP growth will reach 2-3%. At the same time, the world economy will grow by 3.6%.
The key factor for the Russian economy will remain the dynamics of the oil market. The Ministry of Economic Development forecast assumes an average cost of a barrel at $40. If oil prices exceed this level, the government will be able to restore reserves of the Reserve Fund, which have decreased significantly during the crisis.
For sustainable growth of the domestic economy, it is necessary to stimulate the development of non-resource exports, representatives of the Ministry of Economic Development emphasize. In this case, dependence on fluctuations in energy prices, which is the cause of cyclical crises, will be reduced.
Improved macroeconomic dynamics will lead to increased investment and restoration of real income growth. In addition, the authorities do not predict a significant weakening of the domestic currency.
In such conditions, price growth will slow down to 3.8-4%, officials emphasize. This dynamics is reflected in deflator forecasts for next year.
Forecasts for 2018: officials versus experts
Taking into account the dynamics of the economic situation, representatives of the Ministry of Economic Development prepared forecasts of the main price coefficients for 2018:
- CPI index – 104.3;
- price index for industrial goods – 103.8.
The Central Bank also expects to keep inflation within 4%. The slowdown in inflation will allow the regulator to continue reducing the key rate, which will ensure cheaper credit resources. As a result, the economy will receive an additional impetus for development.
Experts are not confident in price stability in the near future, which is due to the influence of several factors. Before the elections, the authorities will increase federal budget spending, directing funds to increase social benefits. Excessive ruble liquidity will lead to accelerated inflation.
In addition, the stability of the Russian currency in the coming years remains in question. The ruble remains dependent on oil market trends, which creates threats to the stability of the foreign exchange market. Experts also note a significant outflow of capital, which is reflected in the dynamics of currency quotes. Speculators are reacting to growing geopolitical risks and a reduction in the Central Bank rate by reducing investments in Russian assets.
The collapse of oil prices will provoke a new stage of crisis for the Russian economy. Unlike 2014, the government does not have significant financial reserves that could help stabilize the situation. At the same time, the domestic budget will lose significant revenues, which will lead to an increase in the deficit. In such conditions, the Russian currency will devaluate, which will lead to a corresponding increase in prices.
The resumption of economic growth allows experts from the Ministry of Economic Development to lower their forecasts for deflator indices for the coming years. Inflation in 2018-2019 will decrease to 4%, which corresponds to the forecast level of the Central Bank.
A slowdown in price growth will lead to an increase in real incomes of the population. Also, the Central Bank will be able to reduce the key rate, which will lead to a reduction in the cost of borrowed resources.
Lower inflation could be at risk if oil prices resume falling. In addition, next year the government will increase budget expenditures, which will affect price dynamics.
Forecasts for 2019
When determining deflator indices of the Ministry of Economic Development for 2019-2021, officials are developing several scenarios:
- Base– preservation of the current values of both internal and external factors, prices for petroleum products will continue to fluctuate at $40-50 per barrel, customs duties will remain at the 2019 level;
- Target or most unfavorable– tougher sanctions, a drop in oil prices to critical levels, an increase in customs duties several times and, as a consequence, an increase in inflation and unemployment within the country;
- Favorable– weakening or complete lifting of sanctions, rising prices for oil products, reducing customs duties on Russian goods.
Officials have already determined the deflator index values for 2019 (all indicators are enshrined in the Forecast of Socio-Economic Development of Russia until 2024):
- Agricultural – 103.9;
- Oil – 104.3;
- Water supply – 104.9;
- Electricity and gas supply – 106.1;
- Ind. prices in the consumer sphere – 104.6;
- Construction – 105.0.
These indicators refer to the “basic” scenario for the development of the Russian economy.
How to calculate deflator indices
The calculation of the deflator index (ID) is the ratio of nominal indicators to current indicators, after which the final value is converted into %.
Formula for calculation: ID = nominal indicators / real (current) indicators × 100%
The GDP ID is also calculated using a given formula (nominal GDP / real GDP × 100%). In this way, it is possible to determine the dynamics of prices for all goods and services in the sphere of consumption and production. As for GDP ID, we are talking about price dynamics in the Russian economy as a whole.
Look video with an example of calculating GDP with a deflator:
The 2020-2021 deflator index is a special economic indicator that allows you to predict the final price of certain goods, works and services, as well as estimate the real income of the population or the purchasing power of Russians. In the article we will understand what this indicator represents, and also determine what deflator indices will operate for 2020-2021.
What kind of indicator is this?
In simple terms, the deflator index is a certain economic coefficient that allows you to calculate the final cost of services, goods, products, and work. For example, the deflator index for 2020 in construction, prices for food, utilities and household services, the cost of medicines and basic necessities.
By approving the deflator index for 2020-2021, the Ministry of Economic Development determines what price values will be in the future. Such forecasts are necessary so that officials can timely adjust socio-economic policies. In simple words, to identify a number of measures that will improve the life of the Russian people and prevent the excessive influence of negative factors (impoverishment of the population, inflation, a sharp jump in unemployment, rising prices).
For comparison, the price index and deflator index - the meanings of the terms are quite similar. Only a price index indicates what specific value the price of a specific product will take in a specific period of time. And the deflator index, in turn, determines price values for a group of goods, works or services.
How it works
When developing the deflator index for 2020, the Ministry of Economic Development approves the Order for several periods at once. The values are used to forecast the development of the country, as well as to determine measures for social and economic support of the population.
The deflator index (calculation formula) is defined as the ratio of the nominal price indicator to the real price indicator, converted into a percentage.
For example, the key macroeconomic indicator, the GDP deflator index, formula:
It is worth considering that this indicator has a significant drawback. It understates the inflation rate. That is why a number of representatives of ministries and departments use deflator indices for economic forecasts. As a result, the results obtained show a systematic and stable improvement in the lives of the population, as well as an endless increase in citizens’ incomes. In reality, this does not happen, at least on the scale described.
After the deflator indices of the Ministry of Economic Development until 2021 have been approved, officials begin comprehensive analysis and forecasting. The main goal is to develop probable scenarios or, in simple terms, action plans that will be applied in case of favorable or negative development.
Deflator indices for the next three years
| Industry | 2020 | 2020 | 2021 |
|---|---|---|---|
| Industry (BCDE) | |||
| deflator | 103,3 | 102,9 | 103,0 |
| PPI | 103,4 | 103,0 | 103,0 |
| including without fuel and energy complex products (oil, petroleum products, coal, gas, energy) | 104,1 | 104,1 | 103,9 |
| Mining (Section B) | |||
| deflator | 101,2 | 100,6 | 101,0 |
| PPI | 101,4 | 101,2 | 101,1 |
| Extraction of fuel and energy minerals (05, 06+09) | |||
| deflator | 100,9 | 100,4 | 100,8 |
| PPI | 101,2 | 101,0 | 100,9 |
| Coal mining (05) | |||
| deflator | 104,5 | 104,0 | 103,7 |
| PPI | 104,3 | 104,1 | 103,9 |
| thermal coal | |||
| PPI | 104,6 | 104,1 | 104,1 |
| Crude oil and natural gas production (06+09) | |||
| deflator | 100,5 | 100,0 | 100,4 |
| PPI | 100,8 | 100,7 | 100,6 |
| Mining of metal ores and other minerals (07, 08) | |||
| deflator | 104,0 | 102,6 | 102,9 |
| PPI | 103,6 | 103,0 | 103,0 |
| Metal ore mining (07) | |||
| deflator | 104,2 | 102,5 | 102,7 |
| producer price index | 103,7 | 102,8 | 102,9 |
| Mining of other minerals (08) | |||
| deflator | 103,2 | 103,3 | 103,3 |
| PPI | 103,1 | 103,2 | 103,2 |
| Manufacturing (Section C) | |||
| deflator | 103,9 | 103,5 | 103,5 |
| PPI | 103,7 | 103,5 | 103,4 |
| Production of food products, beverages and tobacco products (10, 11, 12) | |||
| deflator | 103,1 | 103,2 | 103,5 |
| PPI | 102,9 | 103,2 | 103,4 |
| Textile production, clothing production, leather and leather goods production (13, 14, 15) | |||
| deflator | 104,2 | 103,8 | 103,5 |
| PPI | 104,1 | 103,8 | 103,6 |
| Wood processing and production of wood and cork products, except furniture, production of straw products and wicker materials (16) | |||
| deflator | 105,1 | 104,6 | 104,3 |
| PPI | 104,6 | 104,4 | 104,3 |
| Production of paper and paper products (17) | |||
| deflator | 105,2 | 104,7 | 104,4 |
| PPI | 104,7 | 104,5 | 104,3 |
| Production of petroleum products (19.2) | |||
| deflator | 101,3 | 100,1 | 100,6 |
| PPI | 100,9 | 99,8 | 100,3 |
| Production of chemicals and chemical products, production of medicines and materials used for medical purposes, production of rubber and plastic products (20, 21, 22) | |||
| deflator | 105,2 | 104,9 | 104,7 |
| PPI | 104,8 | 104,7 | 104,5 |
| Production of other non-metallic mineral products (23) | |||
| deflator | 103,9 | 103,7 | 103,6 |
| PPI | 103,9 | 103,8 | 103,7 |
| Ferrous metal production (24.1, 24.2, 24.3, 24.5) | |||
| deflator | 104,2 | 104,7 | 103,7 |
| PPI | 103,8 | 104,4 | 103,1 |
| Production of basic precious metals and other non-ferrous metals, production of nuclear fuel (24.4) | |||
| deflator | 106,0 | 104,5 | 104,1 |
| PPI | 105,6 | 104,3 | 103,7 |
| Production of finished metal products, except machinery and equipment (25) | |||
| deflator | 104,5 | 104,5 | 104,2 |
| PPI | 104,3 | 104,3 | 104,1 |
| Mechanical engineering products (26, 27, 28, 29, 30, 33) | |||
| deflator | 105,5 | 105,3 | 105,4 |
| PPI | 105,3 | 105,1 | 105,1 |
| Others | |||
| deflator | 102,8 | 102,9 | 103,2 |
| Providing electricity, gas and steam; air conditioning (35) | |||
| deflator | 105,0 | 104,2 | 104,0 |
| producer price index (PPI) | 105,0 | 104,2 | 104,0 |
| Water supply; water disposal, organization of waste collection and disposal, pollution control activities (Section E) | |||
| deflator | 104,0 | 104,0 | 104,0 |
| PPI | 104,0 | 104,0 | 104,0 |
| Agriculture | |||
| deflator | 103,5 | 103,1 | 103,3 |
| Producer price indices | |||
| Crop production | |||
| deflator | 103,7 | 102,9 | 102,9 |
| Livestock | |||
| deflator | 103,4 | 103,5 | 103,7 |
| price index for sales of products by agricultural producers | 103,5 | 103,8 | 103,9 |
| Transport incl. pipeline | |||
| deflator | 104,3 | 104,2 | 104,1 |
| PPI | 104,4 | 104,3 | 104,3 |
| PPI with the exception of pipelines. transport | 103,6 | 103,7 | 103,6 |
| Investments in fixed assets (capital investments) | |||
| deflator | 105,0 | 104,4 | 104,2 |
| price indices | |||
| Construction | |||
| deflator | 105,0 | 104,8 | 104,5 |
| PPI | 104,7 | 104,6 | 104,5 |
| Consumer market | |||
| retail trade turnover, deflator | 104,2 | 103,5 | 104,0 |
| CPI for goods | 104,0 | 103,3 | 103,9 |
| paid services to the population, deflator | 104,8 | 104,2 | 104,3 |
| CPI for services | 104,9 | 104,3 | 104,4 |
Development scenarios
Currently, the Ministry of Economic Development is developing three types of scenarios for the Russian economy:
- The basic plan, which implies that the indicators of the main factors of the Russian economy will remain at the base or current level. That is, they will not undergo any changes.
- The conservative scenario provides for a significant deterioration in socio-economic indicators. The plan takes into account not only internal but also external factors.
- A target plan under which the optimal development of events is expected for the Russian economy both in the domestic and foreign markets. For example, the lifting of sanctions, the reduction of fiscal duties and encumbrances, rising prices for raw materials, etc.
Not only internal development indicators (GDP, tax system, minimum wage, price indicators, size of the consumer basket) are analyzed. But also external factors. Currently, special attention is paid to the sanctions that were applied by the United States and the European Union.
Basic scenario
This forecast plan provides the following values:
- Energy demand will increase. Prices for petroleum products will remain at current levels. Such values will be achieved by complying with the agreement on reducing oil production. Although some pressure from the United States will still remain due to increased shale oil production.
- Maintaining global economic growth at 2.8%. Countries with the most developed economies are expected to slow down their pace of development. The Chinese economy will slow down due to rising debt burden and trade tariffs. Developing countries will not be able to improve their performance due to lower prices in the commodity market.
- Exports of Russian oil products will increase. The reason will be the best price offers on the Russian market in comparison with competing countries.
- The growth in the level of investment will be ensured by compliance with the standards of the federal program to support medium and small businesses (benefits for small businesses, tax holidays).
- The development of the import substitution sector will expand industrial areas, increase the number of jobs, and increase labor productivity.
The result of economic development under this scenario will be a reduction in the unemployment rate to 4.7%, as well as an increase in the real level of income of the population to 1.5%. Which will have a positive impact on increasing demand, as well as on the growth of consumer lending.
Target development plan
The deflator index for 2020 for estimates with positive development provides for similar indicators as the basic plan. However, officials provided additional (exceptional) factors:
- Demographic indicators according to Rosstat. Significant population growth is planned, which will be due not only to an increase in the birth rate, but also to migration growth.
- Increased production of petroleum products will increase the flow of investment, both domestic and external (foreign) capital. Growth will be ensured by the commissioning of new wells and improvement of production technologies.
- The Russian ruble will strengthen against foreign exchange rates. Namely in relation to the American dollar and the euro.
- The dynamics of growth of gross domestic product will reach at least 3.1% per year.
Let us note that the main lever for achieving indicators of positive economic development is strengthening positions in the commodity market, namely through the sale of oil products and gas.
Conservative plan
The forecast deflator indices of the Ministry of Economic Development until 2020 imply that the Russian economy will be affected by numerous negative factors. The main unfavorable criteria include:
- Tightening of the monetary economy of other countries.
- "Hard landing" of the Chinese economy.
- A sharp decline in the price of oil (below $35 per barrel).
- Weakening position of the ruble against the US dollar.
- Decrease in GDP growth rate to 0.8%.
- Inflation will reach 4.3% or higher.
Officials pay special attention to this development plan, since the impact of the global crisis cannot be ignored.
Indicator forecast for 2020
The planned deflator indices of the Ministry of Economic Development for 2020, taking into account the latest changes, were finally adjusted at the last moment. The main changing factors were: an increase in the retirement age, an increase in VAT, a tax maneuver in the oil industry, and an increase in excise taxes on fuel.
Taking into account these innovations in tax and social policy, the Ministry of Economic Development announces the following indicators:
- consumer goods - 104.4;
- goods of the industrial sector - 104.1;
- wholesale gas prices - 103.8;
- coal cost coefficient - 103.9;
- expected cost of fuel oil - 102.1;
- forecast prices for electricity (retail) - 109.1;
- utilities (water supply and heat supply) - 105.1;
- deflator index for 2020 of the Ministry of Economic Development (construction) - 105.0;
- The planned prices for cargo transportation by Russian Railways are 105.2.
Expected indicators for the base scenario in the table:
Ask questions and we will supplement the article with answers and explanations!
The deflator index is a coefficient that reflects changes in consumer prices for goods, works and services when converting current values into constant prices. We tell you how to calculate the deflator, how to use it in government procurement and what the forecast deflator indices of the Ministry of Economic Development are until 2020.
What is meant by deflator coefficient?
Price index and deflator are identical concepts that are used by specialists to calculate the final cost of goods, work or services. A deflator is a value used to convert current economic indicators into constant prices.
This is a coefficient that is set annually and calculated for several periods in advance, serving as the basis for government forecasting of economic development in future periods. For example, the 2020-2020 deflator index was forecasted back in 2017. The deflator is necessary when calculating key macroeconomic indicators - gross domestic and national product (GDP and GNP), accumulation fund, consumer price index (CPI), dynamics of physical volume of consumption and many others.
Industry indices are calculated by specialists from the Ministry of Economic Development, taking into account the price level for goods, works and services recorded in the previous period. The coefficient is set annually and fixed by administrative documents of the ministry. Thus, the indicator for 2020 was determined by Order of the Ministry of Economic Development No. 579 dated October 30, 2017, and the official deflator index for 2020 by the Ministry of Economic Development Order has not yet been published, but is expected in the near future.
The procedure and methodology for calculating the coefficient are regulated by regulations of the Government of the Russian Federation - the rules for calculating forecast values are specified in Decree of the Government of the Russian Federation No. 1234 dated November 14, 2015, as well as in Order of the Ministry of Economic Development of Russia dated June 1, 2018 No. 276, which establishes the regulations for the use of cost indices and deflators by type of economic activities (in the implementation of state defense orders).
To find out the deflator index, the calculation formula is the result of the ratio of the volume of nominal GDP and the volume of real GDP multiplied by 100.
In turn, the GDP deflator index (calculation formula) is the following mathematical calculation: the value of the GDP basket in current prices / the value of the GDP basket in base year prices × 100%.
Since the formula uses data on all goods, works and services produced in the country when calculating the coefficient, the calculated deflator value reflects the real dynamics of the price level in the economy. When calculating the index, price movements are also taken into account, taking into account changes in the country's production structure, actual volumes of production of industrial and industrial components in physical terms and other indicators recorded in the reporting period.
The Paasche aggregate index is calculated as follows:
By calculating the value of the Paasche price index, you can analyze changes in price indicators for goods, works and services during the reporting period. compared to base prices for similar product categories sold in the reporting period. Thus, the Paasche coefficient illustrates the degree of increase in price or, conversely, decrease in the cost of manufactured products.
Using the GDP deflator, calculated using the Paasche formula, you can also track the level of inflation. If the calculated value is more than 1 (or more than 100%, if the calculation is carried out as a percentage), then inflation in the country has increased, but if the calculated value is below 1 (or 100%), then the inflation rate has decreased.
Deflator in 2020 - forecast values
The Ministry of Economic Development has not yet officially published the deflator index for 2020-2021, but forecast values in various production areas have already been presented. At the same time, the indicated values of the coefficient for future periods will still be adjusted by specialists of the ministry, taking into account recent economic changes and social reforms, such as pension (increasing the retirement age) and tax (increasing excise taxes on fuel).
Upcoming events will directly affect the deflator indices of the Ministry of Economic Development for 2020. But when developing a budget and planning procurement activities for the next year and planning periods, customer organizations can use the existing coefficient values calculated by the ministry’s specialists.
Let's present the calculated consumer price index, which characterizes the inflation rate, and deflator indices for 2020-2021 in the table.
| Industries | 2018 | 2020 | 2020 | 2021 |
|---|---|---|---|---|
| Production, transmission and distribution of electricity, gas, steam and hot water | 109,0 | 107,1 | 106,7 | 106,7 |
| Mining | 108,7 | 106,5 | 106,0 | 106,2 |
| Manufacturing industries | 106,8 | 105,4 | 105,1 | 105,0 |
| Industry | 107,6 | 105,9 | 105,3 | 105,5 |
| Construction | 106,8 | 105,9 | 105,2 | 104,9 |
| Agriculture | 105,3 | 104,2 | 103,9 | 103,8 |
| Freight transport | 107,0 | 106,0 | 105,7 | 105,6 |
| Investments in fixed assets (capital investments) | 106,9 | 105,5 | 105,! | 104,8 |
| Retail turnover | 104,9 | 103,9 | 103,5 | 103,7 |
| Paid services to the population | 106,9 | 106,2 | 105,6 | 105,7 |
| Inflation (CPI) average annual | 104,7 | 104,4 | 104,2 | 104,1 |
The index for consumer goods is planned at 104.2. Retail electricity prices will be indexed to 109.1.
Also on the official website of the Ministry of Economic Development there are indices that will be used in 2020 for tax purposes:
- UTII - 1.915;
- simplified tax system - 1.581;
- Personal income tax - 1,729;
- property tax for individuals - 1.518;
- patent - 1,518;
- trading fees - 1,317.
Thus, many industrial and manufacturing sectors are seeing a gradual decline in the ratio. Thus, after calculating the deflator index for 2020 (Ministry of Economic Development), construction and construction work will be calculated with a coefficient lower than in the current year, 2020.
Deflator in procurement under 44-FZ
When carrying out public procurement within the framework of Law 44-FZ, indices are used in the calculation and justification of the NMCC (Letter of the Ministry of Economic Development No. D28i-1688 dated June 22, 2016). The customer calculates the initial (maximum) price of the contract in accordance with the provisions of Art. 22 44-FZ.
When justifying the NMCC calculated using the market analysis method, it is necessary to use annual deflator coefficients, since, in accordance with Part 3 of Art. 22 44-FZ, information on the cost of goods, works, services must be analyzed taking into account price and commercial offers comparable to the base period.
When planning the procurement budget for 2020 and subsequent periods and justifying the NMCC, an industry deflator is used in accordance with the Forecast of socio-economic development of the Russian Federation until 2024. This document contains forecast index indicators by type of economic activity both for the next year and for the planning period 2020-2024.
Use of a deflator in procurement of construction works
Indices are also used by customers when determining the initial (maximum) price based on the design and estimate method (Part 9 of Article 22 44-FZ) when making purchases for construction, reconstruction, and major repairs (Letter of the Ministry of Finance No. 24-01-10/72553 dated 03.11.2017). The deflator index for 2020 for estimates is also indicated in the socio-economic forecast. Currently the coefficient is 105.0.
When concluding a construction contract with a single supplier, the contracting organization must also calculate the cost of the contract on the basis of Part 9 of Art. 22 44-ФЗ - using the design and estimate method.
Regardless of whether the customer enters into a contract with a single supplier or holds a tender, the NMTC (contract price) is calculated by the specialist responsible for procurement at the institution, taking into account the Methodological Recommendations approved by Order of the Ministry of Economic Development No. 567 of 10/02/2013.
Pricing and estimated standardization in the field of urban planning activities are regulated by the provisions of the Civil Code of the Russian Federation, namely Article 8.3. Deflator coefficients are used when calculating the estimated cost of an object by year of implementation (as part of the federal investment project). The NMCC is determined in accordance with the calculated estimate of construction work (Article 22), while the calculation takes into account the base version of the index from the socio-economic forecast.
In the event that construction is carried out using federal budget funds provided for within the framework of the federal targeted investment program, then when determining the NMCC it is recommended to set the size of the initial (maximum) price within the volume of capital investments allocated by the main manager for the implementation of such an investment project (clause 6.3 Methodological recommendations, approved by RF PP No. 427 dated May 18, 2009).
Moreover, if, based on the results of checking the reliability of determining the estimated cost of such objects, the estimate for the years of construction, calculated in the prices of the corresponding years using deflators, does not exceed the volume of allocated capital investments, then the NMCC for construction work is formed based on the specified estimated cost (clause 6.4 of the Methodological Recommendations ).
The deflator index for 2020 in construction should also be used when calculating the cost of design work (clause 1.7 of the Guidelines) for correct planning of future capital investments.
Deflator in procurement under 223-FZ
Deflators within the framework of 223-FZ can be used for the following purposes: if the value of the contract has been adjusted due to rising prices (inflation) in accordance with the forecast indicators of the coefficient, then this is the basis for changing the essential terms of the contract. At the same time, the customer organization is obliged to stipulate this possibility in its procurement regulations. You can see an example of such a procurement provision below.
Application of the deflator index in state defense orders
The index is also used when carrying out state defense orders. In the process of planning the budget for the state defense order for future periods, setting prices for products, as well as to calculate and justify the NMCC, industry deflator coefficients are used. Deflators in the state defense order in 2020 are standardized by Order of the Ministry of Economic Development No. 276 dated June 1, 2018.
The key aspects of using the index in the field of government defense procurement are:
- Determining the forecast price, the price of a government contract when purchasing under the state defense order from a single supplier.
- Formation of forecast prices and NMCC for the implementation of orders under the state defense order.
The application of the coefficient applies to the formation of forecast prices for the development, production, maintenance, repair and disposal of products supplied under the State Defense Order, as well as goods, works and services included in the lists of products with regulated pricing.
The provisions of regulatory documentation on state defense procurement do not apply to the purchase of food products. NMTsK for the corresponding government order should be determined in accordance with Art. 22 44-FZ. The priority method for calculating the initial (maximum) price is the market analysis method (Part 6, Article 22 44-FZ). Based on Part 3 of Art. 22, to calculate the NMCC using comparable market prices, the government customer must use a deflator to bring data on the prices of goods, works or services to the appropriate values.
Thus, the use of a deflator coefficient is mandatory when justifying the NMCC within the framework of the law 44-FZ.