The head of the International Monetary Fund mission in Russia, Yuha Kahonen, arrived in Moscow on an intermediate visit between annual consultations on the fourth article of the IMF charter. This time attention was focused on risks appearing in the Russian economy, first of all due to the eurozone crisis.
Yuha Kahonen thinks that the pace of economic growth in Russia in 2012 will remain stunted: 3.5% (in comparison to 4.1% this year). If the crisis in the eurozone gets worse it will lead to economic recession, oil prices dropping, spending growth in non-oil branches, and the financial sector of Russia will undergo difficulties in getting foreign financing.
In the context of such risks Russian economic policy should be aimed at decreasing risks and developing action plans on resistance to them. Kahonen believes that in the fiscal sphere the main target is increasing reserve funds while oil prices are high. He stated that, considering the environment, Russia finds itself in worse condition than before the crisis in 2008. In the post-crisis period the spending level was high, and at the moment the volume of the reserve fund is much less than it was ahead of the previous crisis.
To accumulate budget reserves, fiscal policy should be tightened. However, the Russian budget for 2012 presupposes increasing spending and softening fiscal policy. According to Kahonen, while oil prices are high it would be reasonable to conduct fiscal consolidation in 2012.
As for monetary policy, the inflation rate is falling. The IMF considers that the Central Bank has formulated an adequate vector, which should be kept, so by 2014 the inflation rate could be reduced by 4-5%. The head of the IMF mission noted that the Central Bank is right to maintain its rates of interest.
A floating exchange rate is beneficial for Russia. For risk reduction it is important to improve monitoring in the banking sector, which would lead to financial stability. Kahonen is disappointed that the bill on financing of borrowers and providing the Central Bank with additional functions in the sphere of monitoring is still undergoing consideration in the State Duma and hasn’t been ratified.
If the crisis of the eurozone gets worse, the IMF urges Russia to use automatic stabilizers in the sphere of fiscal policy. In the long-term perspective, the main objective for Russia is increasing the pace of growth, as it has great potential in the sphere. However, structural reforms for improving the business climate in Russia are needed.
