Chairman of the Central Bank of Russia Sergey Ignatyev doesn't want to burst the Russian economy's bubble.
Photo: Valery Melnikov
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The Macroeconomic Debate Continues
Other high officials and leading economists have taken their places in the dispute between Deputy Prime Minister and Finance Minister Alexey Kudrin and Minister of Economic Development and Trade Elvira Nabiullina over the priorities for the Russian economy. Chief of the presidential administration expert department Arkady Dvorkovich supported Nabiullina at a meeting of the Association of Russian Banks yesterday, saying that “Our analysis shows that the Russian economy is not overheated today” and emphasizing that bank crediting can be increased, with proper risk management.
Chairman of the Central Bank Sergey Ignatyev objected that the growth of crediting was “ambiguous.” “The rapid growth of crediting encourages an increase in demand for goods and services and economic growth,” he conceded, continuing, “but such rapid growth of credits, including those increasing banks' debts to foreign creditors, leads to a rapid increase in the money mass and prices.” He said it could also lead to a worsening of the quality of credit portfolios. He pointed out that, although the growth of crediting to individual borrowers decreased to 57 percent in 2007, from 75 percent in 2006, the share of overdue loans increased, to 3.4 percent on February 1, 2008. He also repeated Kudrin's concerns about “a financial bubble, especially in housing construction.”
Former deputy finance minister, deputy chairman of the Central Bank, head of the Federal Financial Markets Service and chairman of the board of MDM Bank Oleg Vyugin came down on the side of Kudrin and Ignatyev yesterday as well at a conference at the Higher School of Economics, saying that the current model is “attractive but unstable in the long-term view.” He emphasized that the model is especially vulnerable to external shock. Zeljko Bogetic, chief economist at the Russian office of the World Bank has also identified the main risk to the Russian economy as a fall in oil prices, thus supporting the view of Kudrin and company.
www.kommersant.com
All the Article in Russian as of Apr. 03, 2008
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