Inevitable Consequences

The financial crisis will cause a slowdown in economic growth in Russia

The government's actions to save the domestic financial system were generally approved by market participants. Many analysts and bankers consider the authorities' measures to be adequate to the current events. However, despite all the efforts of the state, there will definitely be negative consequences of the crisis; one of the most obvious of them is the slowdown in economic growth in Russia.

“I would like to believe that the Bank of Russia, when issuing loans, and the Ministry of Finance, when placing deposits, adequately assess the real condition of the bank, that is, that bankruptcy will not follow the loans,” famous economist Sergei Aleksashenko told Vremya Novostey. At the same time, he admits that the steps of the financial authorities to support the liquidity of the banking sector are certainly justified at such a time, because the alternative to this could be paralysis of the settlement system (it must be understood that these steps will in no way affect the state of the stock market).

An analytical report from Renaissance Capital Investment Company states that government measures may be sufficient to restore the pre-crisis functioning of the money market. As is known, yesterday the largest banks, including state-controlled institutions, as well as some Russian subsidiaries of foreign banks, resumed repo operations, which, as analysts at Renaissance Capital believe, “gives reason to hope for the resumption of normal functioning of the Russian financial market within a few days."

According to the head of the Economic Expert Group, Yevsey Gurvich, in general, the measures taken by the authorities can be considered adequate to the current situation. By using budget funds and lowering the reserve requirements, banks can obtain additional liquidity. “It is not entirely clear, however, why it was necessary to give money to three state banks, and not directly lend to those financial institutions that need it. This would be a more market-based measure, but it is unclear what function VTB, Sberbank and Gazprombank have. Are they banks or government agents?

The head of Troika Dialog Management Company Pavel Teplukhin also considers the authorities’ measures to be timely. “We need to create a cushion of liquidity in the market,” he said while speaking on the Ekho Moskvy radio station. The suspension of trading on stock exchanges, as well as the restriction of “short” purchases, introduced by the Federal Financial Markets Service as anti-crisis measures, are “an absolutely market-based global practice,” Mr. Teplukhin believes.

In his opinion, the reduction of export duties, as well as the state’s proposal to buy back shares of large Russian banks and corporations from shareholders (buy back) will provide “a significant injection into the Russian economy.” “The state will thereby demonstrate that it has confidence in the sustainability of large companies. Even an announcement about this can have a significant impact on the market,” he emphasized.

Mr. Gurvich, on the contrary, considers it unnecessary if the authorities begin to support stock prices of Russian companies. Yesterday, President Dmitry Medvedev announced the allocation of 500 billion rubles. to support the stock market. “It is unclear how these funds will be used,” says Mr. Gurvich. -- If government money is used to buy shares of companies, this will support the owners of these securities, not the economy. This is a very dangerous measure that could lead to an outflow of investors from the market.”

Both Mr. Teplukhin and Mr. Gurvich believe that tax policy decisions are needed to stabilize the market, which will reduce the degree of uncertainty. In addition, “strong signals to investors” are needed. “Russia made it clear that it was ready to abandon all WTO agreements, this greatly frightened foreigners. So far, the Russian authorities have not done anything to stop investors leaving the market,” states Mr. Gurvich.

According to Mr. Aleksashenko, the Russian authorities themselves are partly to blame for the current crisis. Situations similar to the current one arise from time to time in the Russian market, but for the first time in many years, this crisis arose in parallel with the global financial crisis. “At the same time, our authorities “added fuel to the fire” by losing the information war associated with the Georgian campaign, which provoked a powerful flight of capital from Russia. - says Mr. Aleksashenko. -- The main reason for the sharp drop in Russian stock prices is the lack of domestic demand; there are simply no investors in the country who could buy depreciating assets. Traditionally, such investors are insurance and pension funds (or rather, the funds of these funds). But in our country it is simply prohibited to invest pension money in stocks, and insurance companies have not been able to develop their business enough to become significant players in the market.”

The newspaper's interlocutors are not particularly optimistic about how the economy will develop further. Experts expect the situation in the country to worsen due to the crisis. “The situation on world markets remains unpredictable, so it is difficult to say what will happen in Russia,” Mr. Gurvich believes. “But it is already obvious that inflation will accelerate and economic growth will slow down.”

“Undoubtedly, the Russian economy, even if the crisis ends relatively quickly, will face a reduction in lending volumes from the banking sector, which cannot but affect the slowdown in economic growth. If the crisis drags on, the consequences may be more serious,” predicts Sergei Aleksashenko.

Andrey DENISOV, Natalia ROMANOVA