By Vestnik Kavkaza
The central banks of the major countries of the world must not abandon programs to support the economy, the head of the International Monetary Fund Christine Lagarde says. She thinks that the key economic regions (especially Europe) are still in need of support, as they struggle against the consequences of prolonged financial crisis. This includes the preservation of the low base rate, which should correspond to the state of the economy. Director of the FBK Institute of Strategic Analysis Igor Nikolayev and head of laboratory at the Gaidar Economic Policy Institute Vladimir Nazarov told what to expect from the economic crisis in Russia.
According to Nikolayev, “it is much more interesting to evaluate the economy according to the trends that emerged. If they are persistent, if you have not taken proper measures to solve the basic problems - be sure this trend will lead to very unpleasant consequences. In our opinion, the main problem is the high tax burden on the business. They are not being solved. The economic situation is uncertain. It is actually enhanced. The proposals on pension reform are so complicated that the business does not really understand what happens in the end. Therefore, the assessment of the situation is as follows: the situation is getting worse. It will not hurt in the next month, but we are crouching”.
In addition, the situation is complicated by other factors. First, there is the expected curtailment of quantitative easing in the U.S. in September. In this case, the economist said, oil prices are likely to be reduced, and for the Russian economy which is so dependent on the raw materials market it is a trouble. Furthermore, difficult situation in Europe is not over.
“In conjunction with these factors, our forecast that the trend of deterioration will continue”, the expert said. According to him, purely politically it would be difficult for the Ministry of Economic Development to mention a figure below 2%. “Our prediction is that, of course, 2% will not be reached… I assume that we can get this year 1 - 1.5%”, Nikolayev says.
“Indeed, the crisis is not resolved”, Vladimir Nazarov, head of the laboratory of the Gaidar Institute of Economic Policy, says. “The world economy was injected with a very strong dose of anaesthetic, three programs of quantitative easing, so really at the moment no one feels the pain. If you look at what is now being discussed in the U.S., at the dynamics of economic growth, unemployment, the data in general is not catastrophic, more or less, it is even encouraging. However, we must realize that it happened because of a massive infusion of financial support. And we see that a number of other parameters, the U.S. debt, budget deficit, they are, in general, uncontrollable, and this will sooner or later lead to the fact that the program of quantitative easing will be reviewed”.
As for Russia, according to Nazarov, “We have not done anything since the last crisis, we have filled it with money from the reserve fund, and put a big fat point on it. So, we see that our country is, if you compare it with other countries, paradoxically, in the worst position. The oil price in the budget was planned at $97 per barrel, now the average since the beginning of the year is $107 per barrel, i.e. oil prices are well above what we planned in the budget, and we can see that the growth rate is much slower than anticipated. Not to mention the fact that at the same oil prices, just recently, our economy was growing by leaps and bounds. Obviously, that source of growth, which has been in our case, the oil-gas rent, is completely exhausted”.
It seems to Nazarov that the way out of the crisis will first begin in developed countries: “We first will see a significant change in the structure of the global economy, changes in the trade deficit and the U.S. budget, quantitative easing, etc., we will see how they will survive this thing, where they will be as they come out of it. We'll start the dive with them, but it will take us longer to come out of it, because we need to go a long way. In this case you need to rebuild too many institutions in order to change. Relatively speaking, in the U.S., you can focus only on the defense budget and health care, if some solutions are found there, we can already say that the budget is balanced. If the economy will survive after that, it will be quite well developed. Despite the fact that they, too, have an over-regulated economy, I would not have any illusions here, they have a lot of licensing and various business obstacles, but nevertheless there is an absolute guarantee of property rights and efficient judicial system and it makes this design quite viable. In our case, when we do not have an effective court system, and there is no protection of property rights, we have these technical issues ... We cannot change our structural imbalance without changing the key institutions that are at the foundation of our society. So, until we do so, we will follow the ups and downs of the world economy, but with a tendency to decrease. If there is growth, then we too will grow, but not as rapidly as we could have. If there is a fall, here it will be more painful than it would have been if we had a different system”.
Forecasting the ruble rate, Nazarov said: “A weakening further than 34 in exactly this oil price level will not happen. If the price is lower, respectively, there can be anything you want. With this oil price, it seems to me that the exchange rate is undervalued. Most likely, at this oil price, the ruble could be much more expensive, around 30. It seems to me that the behaviour of the Central Bank indicates, if I interpret it correctly, that the Central Bank does not believe in a strong devaluation of ruble. It seems that none of our mega-regulators, nor the price of oil speak in favour of a sharp devaluation of the ruble. It seems that the ruble will be stable at these oil prices”.
