People line up to ATM in time of the August 1998 crisis.
Photo: Sergey Voronin
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Economy Heated from Inside
Consumer boom is one of the major driving forces of transition economies of Europe, including Russia. In 2004 to 2005, the actual crediting stepped up 46.6 percent on year in emerging countries of Europe vs. 10.2 percent in developed economies, and the annual pace of economic growth was 6 percent to 7 percent vs. 3 percent respectively. But consumer boom bears danger, EBRD warned.
On the one hand, most of analysts say that, nowadays, the crisis risks are minimal in Central and Eastern Europe, including Russia. The analysts of Transition Economy Institute, for instance, forecast some mid-term difficulties only for Belarus and Kyrgyzstan, should the economic condition deteriorate there. On the other hand, taken separately, no correct policy could be deemed an absolute shield against the crisis. In Mexico, quite a lot of budget and macroeconomic indicators were at their best on the eve of tequila collapse of 1994-1995, warned analysts of ING Bank in the recent report.
Similar to today’s performance of banks of Eastern Europe and Russia, the banks of Mexico used to borrow aggressively overseas to stand up to consumer boom. But a raft of them failed to square up once the FRS hiked rates to 5.25 percent.
One of the reasons was the local ownership for the banks in Mexico. Their management was not as much efficient as it would have been if the credit institutions of developed states had had shares in authorized capital. Judging by the ING report, the situation is even worse in Russia, where all seven biggest banks belong to local owners in part and in whole.
The Asian crisis of 1998 shouldn’t be forgotten either. There, the collapse was triggered by consumer boom, when the private loans-to-GDP ratio stepped up to between 50 percent and 110 percent (the tequila crisis happened at 40 percent). Russia has 25.7 percent now, and, according to Alfa Bank, the retail credits account just for 5.4 percent of GDP. But the annual pace of actual credits granted to population is 75 percent vs. 21 percent worldwide on average, IMF said.
www.kommersant.com
All the Article in Russian as of Nov. 20, 2006
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