Paul Thomsen, head of the IMF mission in Russia, hailed the Central Bank's raising of the refinancing rate to 10.5 percent, but said that it was insufficient.
Photo: Grigoriy Sobchenko
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Govt. and World Bank Disagree over Economy
Economists at the World Bank and International Monetary Fund have released an analysis of the Russian economy in its current condition. The IMF warns of the risk of overheating the economy, while the World Bank states that the economy already is overheated. The government is not inclined to take the organizations’ advice to raise interest rates and lower budget expenditures. Deputy Minister of Economic Development Andrey Klepach told Kommersant, “Lowering inflation by reducing economic growth is senseless.”
The annual World Bank report on the Russian economy had its positive moments as well. It noted that, between 1999 and 2007, the GDP rose from $196 billion to $1.3 trillion, unemployment fell from 13 percent to 6.1 percent and the budget deficit equal to 3.1 percent of the GDP has been replaced by a surplus equal to 6.1 percent of the GDP. International reserves have risen from $12.5 billion to $534.4 billion. “Only inflation spoils the picture,” commented chief economist in the World Bank Russian office Zeljko Bogetic, “and it is a clear sign that the economy is overheated.” Another sign of overheating, the World Bank claims, is the fact that the GDFP is growing by 8.1-8.8 percent per year, much higher than the “7-percent long-term trend.” To that can be added the growing gap between the rate of salary growth and the productivity of labor.
Unless the economy is cooled down, the World Bank argues, economic growth will slow, the balance of payments will worsen significantly and, in the very long term, there will be a currency crisis. Bogetic placed the blame for inflation squarely on government policy, saying that budget policy had turned from the basis for steady economic growth to a source of macroeconomic destabilization. He noted that, without oil and gas income, which is not permanent, the federal budget deficit would have grown to 5.9 percent this year. In the Russian government, they called the organizations’ concerns exaggerated.
www.kommersant.com
All the Article in Russian as of June 03, 2008
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