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Socio-Economic Analysis for DIBI MILANO Company Case Solution & Answer

Socio-Economic Analysis for DIBI MILANO Company Case Solution

Fiscal Policy of Russia

Due to strong dependence of the government on its oil and gas industry, the country faced significant fiscal issues, which required the government to redesign its existing policy for future to come. The new rule was implemented in order at stop extra government spending on wasteful items and to project the revenues on the other major projects to enhance the overall GDP of the country; this rule came into effect in the year 2013.

In addition to this, the government also proposed to change its three years budget plan to just one year budgeting, which could significantly help in reviewing the performance time to time and amend them accordingly. (Fiscal). All these major changes helped the government in stabilizing its performance in terms of reduction in unemployment rate and a drop in the inflation rate, all these points positively impacted the market, the consumers are now less pessimistic and the economy is certainly going to boost in its upcoming future. (Focus Economics, 2016).

From the historical analysis, manufacturing sector is also heading towards growth in the year 2016 and manufacturers in the country are enjoying favorable results due to the significant domestic demand for their products. In addition to this, World Bank also expects that the economy of the country would expand in the near future at a rate of 1.4% in the year 2017. All these points are in favor of the proposed company to pursue for their growth in the Russia, which could be favorable in terms of growth.

Monetary Policy of Russia

In order to attain price stability in the overall Russian Market, the government implemented some monetary policy under inflation targeting regime (Hammond, 2012) whose major benefits focused on the combination of both the rules as well as discretion in the overall policy. The significant elements of this regime are given below:

  • The Policy is created based on the wider amount of historical information.
  • The Policy works in provision of Transparency.
  • The policy aims to achieve price stability.
  • All the issues and the targets regarding inflation are announced publically.
  • It provides a valid accountability mechanism to assess the performance.

Operating under these policies helps the government in stabilizing the prices, which in turn reduces the rate of inflation at a targeted or on an acceptable level. In addition to this price stability factor, Government of Russia also tries to stabilize and run its banking sector smoothly, which is very vital for achieving the profound growth in its upcoming future since the banking sector is the prime financial market, which could significantly help in stabilizing the economy.

All efforts made by the government of Russia with the help of monetary policy instruments could be very beneficial in terms of long-term aspects and future economic outlook seems to be very bright. Only major element to emphasize on is related to the interest rate, which could be considered as the key element whose decision is made in accordance with the guidelines of Single Monetary Policy. (CBR)

Vulnerability to External Change

It can be seen that in the event of an increment in the interest rate prevalent in the United States market, Russian Market could face difficulties in rebuilding its existing reserve policies. Therefore, Russian government proposed to make only one-year budgeting instead of three years to evaluate its position in comparison with the US market. (Hille, 2015)

As far as the effect of the changes in the oil and gas prices are concerned, a major negative impact on the Russian Economy can be seen. In the event of declining oil prices, countries that are on the importing side benefit a lot, whereas on the other hand, countries that are involved in the exporting of oil and gas products suffered a lot. From the country analysis, Russia is a major oil producer in the world and is highly dependent on its oil prices, which are considered as its vulnerability. In the event of a decrease in the oil prices, Russia loses almost around $2bn in revenues. (Bowler, 2015)…………………

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