Finance Minister Alexey Kudrin (left) with Minister of Economic Development and Trade Elvira Nabiullina
Photo: PhotoXpress, PhotoXpress
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Macroeconomic Tensions Come to Light – Again
Russia's top financial officials have once again entered into public discussion about the country's economic priorities. Deputy Prime Minister Alexander Zhukov and Minister of Economic Development and Trade Elvira Nabiullina favor high GDP growth at the cost of high inflation. First deputy chairman of the Central Bank Alexey Ulyukaev and Finance Minister Alexey Kudrin want macroeconomic stability and argue that the economy is overheated. Deputy Prime Minister Sergey Naryshkin entered the fray on their side.
The officials were speaking at various locations, even on different continents. “The problem of doubling the GDP is solvable,” Zhukov stated at a conference at the Financial Academy. “We could reduced the money mass, tighten monetary and credit policy, we could lower inflation, but that would have a negative impact on growth rates and leave the banking system in a difficult situation. We will avoid that extreme.”
Meanwhile, Nabiullina, speaking at a conference at the Higher School of Economics, supported Zhukov, saying that “It is important that the monetary and budgetary measures taken do not restrict economic growth… We cannot permit the slowing of growth rates, unlike some developed countries.”
Kudrin and Ulyukaev expressed opposing views at the same conference at the Higher School of Economics. They spoke about the significant risk of overheating the Russian economy, leading to macroeconomic instability. Ulyukaev stated that rising inflation is one sign of such instability. The imbalance between growth of incomes and productivity of labor is another sign, he said. “We should concentrate on maintaining macroeconomic stability and more conservative budgetary and monetary policy,” he said, adding that an overheated economic is more liable to external shock.
Kudrin spoke even more decisively. “I hope we will be able to withstand the temptation of creating a temporary heaven on cheap money,” he said. He said that state could create an economic bubble of the type that just burst in the United States. He said Russia should take a lesson from it about state support of individual sectors and state intervention in their development. Liberal crediting can lead to those credits becoming low in quality, he added, and investments will become ineffective.
Naryshkin added his support for that view while at a Troika Dialog forum in Singapore. He prescribed a “conservative budgetary policy” to guard against macroeconomic instability in the event that oil prices fall and listed a large number of social ills that might result otherwise. A new government will be formed in May. The distribution of offices in that government will depend on whose arguments are found most persuasive now.
www.kommersant.com
All the Article in Russian as of Apr. 02, 2008
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