This week, the renewed variant of the IMF report “Prospects of the world economy development” was published. The head of the IMF mission in Russia, Odd Per Brekk, held a press conference in Moscow, devoted to prospects of development of the Russian economy in 2012, considering the worsening situation in the world economy.
Odd Per Brekk stated that since the previous report of the IMF was published, in September 2011, financing conditions have worsened, growth pace has reduced and risks of further difficulties have deepened. The current report underlines that recovery of the global economy is under threat of growing tension in the euro region. The head of the IMF mission in Russia emphasized that reduction of the world economy growth is expected from 3.8% in 2011 to 3.3% in 2012, for the euro zone – reduction of GDP by 0.5%. Predictions of economic growth were decreased for all regions of the world, which means necessity of coordinated actions of all countries.
As for short-term targets, Odd Per Bekk thinks that recovery of trust is necessary, as well as overcoming of the euro zone crisis by support of economic growth without reduction of credit financing. The IMF believes that the Russian economy has generally recovered from the crisis of 2008. However, recovery of the economy and GDP was supported by high oil and gas prices, thus, the recovery cannot be considered as stable. In the current report the IMF reduced prediction of the Russian economy growth from 4.1% in 2011 to 3.3% in 2012. Regarding influence of the euro zone crisis on the Russian economy, Russia has managed to cope with its consequences. However, according to the head of the IMF mission, capital drain has been observed, and it is connected with the tendency of avoiding risks and worsening of investment climate in Russia. A further escalation of the euro zone crisis might influence commodities prices, destabilize financing markets and influence negatively the Russian economy.
After the presidential elections in March 2012, the new government will have to develop a long-term economic strategy, which might rely on principles of the Strategy 2020. According to Brekk, a special attention should be paid to priorities of the economic policy. Due to high oil prices Russia has an opportunity to improve and protect its economy. However, the economy of Russia shouldn’t depend on oil and gas prices. It should use human resources effectively for realization of its potential growth.
The IMF detaches four directions, in which the Russian authorities should move in the economic sphere.
First is the medium-term fiscal policy. To provide conditions for private investment the Russian authorities should undertake wide-scale fiscal consolidation. At the moment non-oil deficit of the budget is 10% of GDP. For providing medium-term stability of the budget it is recommended to fix a limit medium-term index of non-oil deficit, which will enable a clear definition of the economy development direction. The Fiscal Code of the Russian Federation defines such index at the level of 4.7% of GDP, but during the crisis this fiscal rule was ignored. The IMF recommends the government of Russia to reach this level of non-oil deficit of the budget by 2015. Radical reforms of the fiscal policy and the pension system of Russia are necessary.
Second – the monetary policy. It should be directed on inflation, as without stable low inflation internal resources cannot be intensified and directed at industry, investment and other objectives. The IMF analysis showed that the optimal level of inflations is 3-5% for Russia. The Bank of Russia stated on intention to shift for a full-scale targeting of inflation by 2014, which will enable to reduce stable inflation. At the same time it is necessary to maintain flexibility of the currency policy and improve tools of the monetary policy.
Third – reforms of the financing sectors. For providing a balanced economic growth it is necessary to improve and develop the financing system. The Russian authorities adopted a new plan of improving control and monitoring of the financing sector. First of all, the laws on consolidated control should be launched. Secondly, the Bank of Russia should produce obligatory normative documents on risk management. Thirdly, the Bank of Russia should be able to use professional understanding of laws and normative act.
Fourth – the investment environment. Along with macroeconomic and financing stability successful implementation of the wide microeconomic agenda will contribute to attracting investments and their effective using.
