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Better business climate surest way to overcome economic crisis - analysts

January 14, 2015, 17:07 UTC+3 Zamyatina Tamara
© ITAR-TASS/Sergei Karpov

MOSCOW, January 14. /TASS/. In the context of the ruble’s latest devaluation spiral, experts polled by TASS say it is essential to take urgent measures to invigorate the economy, better business climate and control budget spending.

The latest dive of the oil prices (to below $45 per barrel) on Tuesday caused the ruble to sink to 65.6 rubles per dollar and 77.25 rubles per euro, below the previous month’s lows. Retailers have been changing price tags every day. In the meantime, at the ongoing Gaidar Economic Forum on Wednesday, Economic Development Minister Alexey Ulyukayev said that “when a crisis is underway, one should stay calm and take care of the family and one’s health, while per barrel prices and sanctions are all transient.”

Russia’s former prime minister, Yevgeny Primakov, who in 1998-1999 steered the economy out of a pre-default state, said at a meeting of the discussion club that “Russia has wasted too much time — a quarter of a century — for carrying out genuine diversification of the economy.” In his opinion, the main problems in the country may emerge due to excessive centralization in all spheres of life, including in the economy.

Infographics Oil prices over 30 years Oil prices over 30 years
Year-average inflation-adjusted oil price. Infographics by TASS

“Yevgeny Primakov’s public criticism of the authorities for the lack of reform in the economy must be heard at last. Primakov’s statement sounded very encouraging, because he is a real, well-recognized heavy-weight in Russian politics. It takes being such a powerful personality of strong will to make lobbyists drop the habit of laying claim to budget money and the assets of Federal Reserve funds. The current centralization of the economy is a way very harmful to the country,” the head of the observer council of the Institute of Humanitarian and Political Studies, Vladimir Averchev, told TASS.

“For launching a Russian economic upturn, it is essential to promptly relieve hundreds of thousands of businessmen of the tremendous bureaucratic pressures, thereby releasing the potential of Russian businesses for creative endeavor. It is private businesses that will be able to create millions of jobs, breathe a new life into the economy, contribute to the growth of the gross domestic product, to strengthening the ruble and to lowering prices of goods and services,” said Averchev, a former leading expert of Russia’s Accounts Chamber. “In that sense, all-round support should be provided for Economic Development Minister Alexey Ulyukayev’s just-proposed initiative for reducing to zero the regulatory pressures on small businesses, to make them exempt from all tax pressures and to declare that all newly-founded businesses are immune to inspections,” Averchev believes.

“There are no magic remedies capable of bringing about an instant economic recovery and a firmer ruble. The current situation as it is, I believe it would be most important to raise the effectiveness of spending by both government-run corporations and by the federal and regional budgets. The monitoring of budget spending should be systematic, public, and transparent. Control of spending contains a powerful economic potential,” Deutsche Bank’s chief economist, Yaroslav Lisovolik, told TASS.

“I am prepared to raise both hands to vote for Ulyukayev’s proposal at the Gaidar Economic Forum for a combination of tough monetary and moderately mild fiscal policies by the authorities. The government’s budget policies should create more incentives to economic growth in combination with more effective spending,” Lisovolik said.

“The situation where Russia’s economy and finance have found themselves now are a result of high interest rates that leave no chances for businesses to operate in a competitive market environment. Only oligarchic entities can thrive. For the past ten years, I have been trying to persuade all high placed officials that the Central Bank’s double-digit key rate can by no means promote economic growth. My opponents may be laughing at what I am about to say, but the normal key rate lies somewhere between five and six percent; a 2-3-percent rate would be still better. This is unachievable, of course, for the time being,” the president of the Association of Russian Banks, Garegin Tosunian, has told TASS.

“At a time when foreign ratings are on the descent, Russia should be more active than ever before to draw the capital of domestic investors, to encourage them to invest not into foreign currencies or economies, but in their own country,” Tosunian said.

“Besides, even despite the continuing oil price slump and a weak ruble one should by no means get desperate. Chaos and panic provoke capital flight from banks. When the ruble starts falling, firming its rate is a daunting task. I believe that the current inflation rate and retail prices are largely an effect of the psychological factor. Steady measures must be taken to improve the investment climate in the country, and bolster the investors’ confidence in the internal market. By doing this, we shall successfully cope with the current crisis precisely the way we did that before,” Tosunian said.

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