Translated material
Canvas. Oil. Oil
Alexey Kudrin painted an optimistic picture of the development of the Russian economy in the coming years
Speaking at a borrowers' forum in St. Petersburg, Finance Minister Alexei Kudrin painted a picture of the near future of the Russian economy. The result is a serene pastoral with some minor disturbing touches.The Russian economy, which experienced an unprecedented financial crisis in the late 90s of the last century, today, according to officials, is more stable than ever. Ultra-high oil prices have made things possible that seemed impossible just a few years ago. The chronically deficit budget has turned into a surplus; the external debt, the payment of which was suspended in 1998, is not only being returned, but is being returned ahead of schedule. The treasury is so full that the most pressing question now is how to spend the accumulated billions and whether excess spending threatens macroeconomic stability.
“The Russian economy has good development prospects,” Finance Minister Alexei Kudrin stated yesterday, noting that in order to form a more predictable market, it would be good to switch to adopting three-year budgets starting in 2008. True, the level of investment leaves much to be desired. Investors are still wary of investing significant sums in Russia (however, the results of the first four months gave reason for optimism). But the reason for this was not economic reasons, but the unpredictability of the actions of officials, judges, etc. In other words, corruption, poor protection of investments and private property in Russia, and many other factors that prevent business from developing.
Both officials and experts are confident that the creation of a favorable investment climate will provide a significant increase in economic growth figures. However, even today this macroeconomic indicator rather pleases the government than disappoints it. According to Alexei Kudrin, GDP growth will be 5.5-6% in the next three years (most independent experts give similar estimates). Annual inflation over this period will decrease to 5%. Already in 2006, according to the minister's forecasts, the growth rate of consumer prices will drop to 9%. “This is the lowest figure in the last 13 years,” the head of the Ministry of Finance notes with satisfaction.
Let us add that from July 1, 2006, Russia is lifting all restrictions on the movement of capital, which also indicates the sustainable nature of the Russian economy. Another example: for the first time, the volumes of outflow and inflow of private capital became equal. Throughout the 90s and early 2000s, capital fled the country. According to some expert estimates, up to $300 billion “flowed” abroad during this time.
The volume of the country's public debt, which was prohibitive in 1998 (140% of GDP), will shrink to 12% in the next two years (while the share of external debt will decrease from 80 to 50%). Alexey Kudrin recalled that negotiations on early repayment of the debt to the Paris Club will continue in June. The result of last year's agreements was the return of $15 billion to creditors (at the same time, the debt to the International Monetary Fund in the amount of $3.3 billion was fully repaid). Alexey Kudrin hopes that this year it will be possible to repay most of the remaining $22 billion.
Funds for early debt repayment, as last year, will be taken from the stabilization fund, which has been accumulating excess revenues from oil exports since the beginning of 2004. Now the fund has already accumulated more than 1.9 trillion rubles. ($71.7 billion). Next week, according to Alexei Kudrin, the funds from the stabilization fund will be transferred to the foreign currency deposit of the Bank of Russia. This operation, according to the minister, will not have an impact on the foreign exchange market. Foreign currency deposit structure: 45% in dollars, 45% in euros, 10% in pounds sterling.
It is clear that Russia's current financial well-being is based almost exclusively on high prices for Russian oil (currently approximately $65 per barrel). It is the favorable foreign economic situation that allows us to constantly increase salaries for public sector employees, social benefits, implement national projects, and now also solve demographic problems. (Yesterday, Mr. Kudrin said that the Ministry of Finance expects to increase government spending on demographics and increasing wages, which will again lead to an increase in budget spending relative to GDP.)
Many experts agree that for a fairly long period Russia is insured against falling oil prices. At least to catastrophic levels for its economy. However, we should hardly forget the lessons of history: it was the fall in oil prices that became one of the main reasons for the crisis of the Soviet economy in the 80s (how it ended is known to the whole world), as well as the default of 1998.